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Exercise 1-9 Fixed, Variable, and Mixed Costs (LO1-4) Kubin Company's relevant range of production is 14,000 to 20,500 units. When it produces and sells 17,250 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 Amount per Unit $ 7.50 $ 4.50 $ 2.00 $ 5.50 $ 4.00 $ 3.00 $ 1.50 $ 1.00 Required: 1. If 14,000 units are produced and sold, what is the variable cost per unit produced and sold? 2. If 20,500 units are produced and sold, what is the variable cost per unit produced and sold? 3. If 14,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 4. If 20,500 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 5. If 14,000 units are produced, what is the average fixed manufacturing cost per unit produced? 6. If 20,500 units are produced, what is the average fixed manufacturing cost per unit produced? 7. If 14,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? 8. If 20,500 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? (Round per unit values to 2 decimal places.) 1. Variable cost per unit 2. Variable cost per unit 13. Total amount of variable cost 4. Total amount of variable cost 5. Average fixed manufacturing cost per unit 16. Average fixed manufacturing cost per unit 7. Total amount of fixed manufacturing overhead 8. Total amount of fixed manufacturing overhead

Answer 1

Solution

Kubin Company

1	Variable cost per unit	$!6.50
2	Variable cost per unit	$!6.50
3	Total amount of variable cost	$231,000
4	Total amount of variable cost	$338,250
5	Average fixed manufacturing cost per unit	$6.78
6	Average fixed manufacturing cost per unit	$4.63
7	Total amount of fixed manufacturing overhead	$94,875
8	Total amount of fixed manufacturing overhead	$94,875

Computations:

1. Determination of the variable cost per unit if 14,000 units are produced and sold:

Variable cost per unit remains constant for any level of activity.

Variable cost per unit –

Direct materials                                     $7.50

Direct labor                                             $4.50

Variable manufacturing overhead     $2.00

Sales commissions                                 $1.50

Variable administrative expense        $1.00

Total variable cost per unit                  $16.50

2. Determination of the variable cost per unit if 20,500 units are produced and sold:

Variable cost per unit remains constant for any level of activity. So, for 20,500 units produced and sold, the variable cost per unit would be as follows,

Variable cost per unit –

Direct materials                                     $7.50

Direct labor                                             $4.50

Variable manufacturing overhead     $2.00

Sales commissions                                 $1.50

Variable administrative expense        $1.00

Total variable cost per unit                  $16.50

3. Determination of the total amount of variable cost related to the 14,000 units produced and sold:

Variable cost per unit is as follows,

Variable cost per unit –

Direct materials                                     $7.50

Direct labor                                             $4.50

Variable manufacturing overhead     $2.00

Sales commissions                                 $1.50

Variable administrative expense        $1.00

Total variable cost per unit                  $16.50

Total amount of variable cost related to the 14,000 units produced and sold = 14,000 x $16.50 = $231,000

4. Determination of the total amount of variable cost related to the 20,500 units produced and sold:

Variable cost per unit is as follows,

Variable cost per unit –

Direct materials                                     $7.50

Direct labor                                             $4.50

Variable manufacturing overhead     $2.00

Sales commissions                                 $1.50

Variable administrative expense        $1.00

Total variable cost per unit                  $16.50

Total amount of variable cost related to the 20,500 units produced and sold = 20,500 x $16.50 = $338,250

5. Determination of the average fixed manufacturing cost per unit produced when 14,000 units are produced:

Average fixed manufacturing cost per unit = total fixed manufacturing cost/number of units produced

Fixed manufacturing cost = $5.50 x 17,250 units = $94,875

Average fixed manufacturing cost per unit when 14,000 units are produced = $94,875/14,000 = $6.78

Hence, average fixed manufacturing cost per unit, when 14,000 units are produced = $6.78

6. Determination of the average fixed manufacturing cost per unit produced when 20,500 units are produced:

Average fixed manufacturing cost per unit = total fixed manufacturing cost/number of units produced

Fixed manufacturing cost = $5.50 x 17,250 units = $94,875

Average fixed manufacturing cost per unit when 20,500 units are produced = $94,875/20,500 = $4.63

Hence, average fixed manufacturing cost per unit, when 20,500 units are produced = $4.63

7. Determination of the total amount of fixed manufacturing costs incurred to support production level of 14,000 units:

The fixed manufacturing overhead cost incurred to support the production level of 14,000 units = $94,875

The fixed manufacturing overhead cost remains constant in whole for any given level of production activity.

The company’s production range is 14,000 units – 20,500 units.

Hence, the fixed manufacturing overhead in total would remain $94,875 for any production activity in the given range of 14,000 units – 20,500 units.

8. Determination of the total amount of fixed manufacturing costs incurred to support production level of 20,500 units:

The fixed manufacturing overhead cost incurred to support the production level of 20,500 units = $94,875

The fixed manufacturing overhead cost remains constant in whole for any given level of production activity.

The company’s production range is 14,000 units – 20,500 units.

Hence, the fixed manufacturing overhead in total would remain $94,875 for any production activity in the given range of 14,000 units – 20,500 units.