Question

Exercise 1-7 Direct and Indirect Costs (L01-1) Kubin Company's relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit $ 8.00 $ 5.00 $ 2.50 $6.00 $ 4.50 $ 3.50 $ 2.00 $ 1.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 21,500 units? b. What is the total indirect manufacturing cost incurred to make 21,500 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 21,500 units. a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an Indirect cost that cannot be easily traced to the Manufacturing Department 3. Assume the cost object is the company's various sales representatives. Furthermore, assume that the company spent $75,250 of total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives' compensation. a. When the company sells 21,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 21,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Answer 1

1.

1a
Direct material per unit	$8
Direct labor per unit	5
Direct manufacturing cost per unit	13
Number of units sold	21,500
Total direct manufacturing costs	$279,500
1b.
Variable manufacturing overhead per unit	$2.50
Fixed manufacturing overhead per unit	6
Indirect manufacturing cost per unit	8.50
Number of units sold	21,500
Total indirect manufacturing costs	$182,750

2.

2a.
Direct material per unit	$8
Direct labor per unit	5
Variable manufacturing overhead per unit	2.50
Fixed manufacturing overhead per unit	6
Total manufacturing costs per unit	21.5
Number of units sold	21,500
Total direct costs	$462,250
2b.
Total indirect cost	$0

3.

Sales commission per unit	$2
Number of units sold	21,500
Total sales commission	$43,000
Fixed portion of sales representatives compensation (21,500*$4.50-75,250)	21,500
Total direct selling costs	$64,500
3b.
Total indirect selling expense	$75,250