Question

Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 4,800 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 $6.00 $3.90 $1.60 $ 4.50 $0.70 $0.55 $0.45 $0.45 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 4,800 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 4,800 units? c. If 5,800 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.) d. If 5,800 units are sold, what is the total amount of variable costs related to the units sold? e. If 5,800 units are produced, what is the average fixed manufacturing cost per unit produced? (Round "Per unit" answer to 2 decimal places.) f. If 5,800 units are produced, what is the total amount of fixed manufacturing cost incurred? g. If 5,800 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 $23.50 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.) i. If 3,800 units are produced, what is the total amount of direct manufacturing cost incurred? j. If 3,800 units are produced, what is the total amount of indirect manufacturing cost incurred? k. What incremental manufacturing cost will the company incur if it increases production from 4,800 to 4,801 units? (Round

Answer 1

Answers

• Concepts—

--Manufacturing cost, which include direct material, direct labor and manufacturing overhead = Product Cost

--Selling & administrative expenses (variable as well fixed) = Period cost.

• Working #1

Direct materials	$                     6.00
Direct Labor	$                     3.90
Variable manufacturing overhead	$                     1.60
Variable manufacturing cost per unit	$                   11.50
Sales Commission	$                     0.45
Variable administrative expense	$                     0.45
Variable selling expense per unit	$                     0.90
Total variable cost per unit	$                   12.40

• Working #2

	Per unit cost at 4800 units	Units	Fixed costs
Fixed manufacturing Overhead	$                    4.50	4,800	$                     21,600
Fixed selling & admin cost:
Fixed selling expenses	$                    0.70	4,800	$                        3,360
Fixed administrative expense	$                    0.55	4,800	$                        2,640
Total Fixed selling and admin cost			$                        6,000
Total Fixed cost			$                     27,600

• Answers

Requirement		for units	Answer values	Working
a	Total Product Cost	4800	$               76,800	[(4800 units x $11.50) + $ 21600]
b	Total Period cost	4800	$               10,320	[(4800 units x $0.90) + $ 6000]
c	Variable cost per unit	5800	$                 12.40	[See working #1]
d	Total variable costs	5800	$         71,920.00	[5800 units x $ 12.40]
e	Average Fixed manufacturing cost per unit	5800	$                    3.72	[$21600 / 5800 units]
f	Total fixed manufacturing overhead	5800	$         21,600.00	[See working #2]
g	Total amount of manufacturing overhead, and per unit	5800	$         30,880.00 total, per unit = $ 5.32	[$21600 + (5800 units x $ 1.60]
h	Selling price $ 23.50, Contribution margin per unit		$                 11.10	[$ 23.50 - $ 12.40 working #1]
i	Total direct manufacturing cost	3800	$               37,620	[(Direct material + Direct Labor) x 3800]
j	Total amount of indirect manufacturing cost	3800	$               27,680	[ (3800 x $ 1.60 variable manufacturing) + $21600]
k	Incremental manufacturing cost		$                 11.50	= variable manufacturing cost per unit