Question

Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,400 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	5.30
Direct labor	$	3.55
Variable manufacturing overhead	$	1.60
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	0.70
Fixed administrative expense	$	0.55
Sales commissions	$	0.45
Variable administrative expense	$	0.45

Required:

e. If 6,400 units are produced, what is the average fixed manufacturing cost per unit produced? (Round "Per unit" answer to 2 decimal places.)

f. If 6,400 units are produced, what is the total amount of fixed manufacturing cost incurred?

g. If 6,400 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis? (Round "Per unit" answer to 2 decimal places.)

h. If the selling price is $22.80 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.)

Answer 1

If 5,400 units are produced:

Variable Manufacturing Cost per unit = Direct Materials + Direct Labor + Variable Manufacturing Overhead
Variable Manufacturing Cost per unit = $5.30 + $3.55 + $1.60
Variable Manufacturing Cost per unit = $10.45

Fixed Manufacturing Cost per unit = Fixed Manufacturing Overhead
Fixed Manufacturing Cost per unit = $4.00

Fixed Manufacturing Cost = Fixed Manufacturing Cost per unit * Number of units produced
Fixed Manufacturing Cost = $4.00 * 5,400
Fixed Manufacturing Cost = $21,600

Variable Cost per unit = Variable Manufacturing Cost + Sales Commission + Variable Administrative Expense
Variable Cost per unit = $10.45 + $0.45 + $0.45
Variable Cost per unit = $11.35

Answer e.

If 6,400 units are produced:

Fixed Manufacturing Cost per unit = Fixed Manufacturing Cost / Number of units produced
Fixed Manufacturing Cost per unit = $21,600 / 6,400
Fixed Manufacturing Cost per unit = $3.38

Answer f.

If 6,400 units are produced:

Fixed Manufacturing Cost = $21,600

Answer g.

If 6,400 units are produced:

Variable Manufacturing Cost = Variable Manufacturing Cost per unit * Number of units produced
Variable Manufacturing Cost = $10.45 * 6,400
Variable Manufacturing Cost = $66,880

Total Manufacturing Cost = Variable Manufacturing Cost + Fixed Manufacturing Cost
Total Manufacturing Cost = $66,880 + $21,600
Total Manufacturing Cost = $88,480

Total Manufacturing Cost per unit = Total Manufacturing Cost / Number of units produced
Total Manufacturing Cost per unit = $88,480 / 6,400
Total Manufacturing Cost per unit = $13.83

Answer h.

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $22.80 - $11.35
Contribution Margin per unit = $11.45