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:

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

Solution’

Question f---

If 6,400 units are produced, The total amount of fixed manufacturing cost incurred will be $ 21,600

.

Fixed manufactiuring overheads at 5400 units produced is $21600 (5400 x 4) . The fixed overheads does not change with change in production level. So when 6400 units are produced the Fixed manufacturing overheads will still be $21,600.

Question g---

If 6,400 units are produced,the total amount of manufacturing overhead cost incurred will be $31,840

	Total Units (A)	Cost per Unit (B)	Total Cost(C=A x B)
Variable manufacturing Overheads	6400	$                1.60	$ 10,240.00
Add: Fixed Manufacturing Overheads			$ 21,600.00
Total Manufacturing Overheads			$ 31,840.00

Per unit manufacturing overheads = (31840/6400)= $4.98

.

Question h

Contribution margin per unit = $11.45

Sales price		$    22.80
Less: Variable costs
Direct materials	$       5.30
Direct labor	$       3.55
Variable manufacturing overhead	$       1.60
Variable selling and administrative expenses	$       0.90
Total Variable costs		$    11.35
Contribution margin		$    11.45