Question

Kubin Company’s relevant range of production is 11,000 to 14,000 units. When it produces and sells 12,500 units, its average costs per unit are as follows:  

	Average Cost per Unit
Direct materials	$	7.20
Direct labor	$	4.20
Variable manufacturing overhead	$	1.70
Fixed manufacturing overhead	$	5.20
Fixed selling expense	$	3.70
Fixed administrative expense	$	2.70
Sales commissions	$	1.20
Variable administrative expense	$	0.70

Required:

1. Assume the cost object is units of production:

a. What is the total direct manufacturing cost incurred to make 12,500 units?

b. What is the total indirect manufacturing cost incurred to make 12,500 units?

2. Assume the cost object is the Manufacturing Department and that its total output is 12,500 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 $33,750 of its 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 12,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 12,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Answer 1

la $7.20 $ 4.20 Direct Materials per Unit Direct labor per unit Direct manufacturing cost per unit Number of units sold Total direct manufacturing cost $11.40 12,500 $ 142,500 $ 1.70 • Variable manufacturing overhead per unit Fixed manufacturing overhead per $ 5. 20 unit Indirect manufacturing cost per unit $6.90 Number of units sold 12,5oo Total indirect manufacturing cost $ 86,250 Calculation: Direct Manufacturing cost per unit = Direct Materials per Unit t Direct labor per Unit = $ 7.20 + $ 4.20 = $11.40 Total direct manufacturing cost = (Direct Manufacturing cost per unit & Number of units sold) = $11.40 X 12,500 - $142,500 ab, Indirect manufacturing cost per unit = (variable manufactu- dung overhead per unit & fixed manufacturing overhead per unit) = $ 1.70 + $ 5.20 = $6.90

Total indirect manufacturing cost = (Indirect manufacturing cost per unit & Number of units to = $6.90 X 12,500 - & 86,250 2 da. $7.20 $ 4. 20 to 1.70 it Direct Materials per Unit Direct Labor per Unit Variable Manufacturing overhead Per Unit fixed Manufacturing over head per Unit Total Manufacturing cost per unit Number of units sold Total direct costs $ 5. 20 $ 18.30 12,500 $ 228,750 abi Total indirect costs calculation: das Total Manufacturing cost per vuit = Direct Materials per vnit & Direct labor per Unit & Variable Manufacturing Overhead per Unit & fixed Manufacturing overhead per unit) - $7.20+ $4.20+ $1.50 +5.20 = $ 18.30 Total direct costs - (Total Manufacturing cost per Unit & Number of Units sold). = $18.30 X 12,500 = $220, 750

(2b, There be e is no indisces re is no indirect manufacturing cost that can not easily traced to the manufacturung Department 3 3a. $ 1. 20 Sales commissions per unit Number of units sold Total sales commisions Axed portion of sales representatives compensation & 12, 500 - Total direct selling expense 12,500 $ 15,000 $ 27,500 3b. The total indirect selling expeme $33,750 calculation: Bas Total sales commissious = (sales commissions per unitx Number of units sold) z $ 1.20 X 12,500 a $15,000 fixed postion of sales representatives' compensation = {(fixed selling expense x units sold) - Total Fixed selling expense on advertising ] = ($ 3.70 X 12,500) - $33,750 - $46,250 - $33,750 - $12,500

Total direct selling expense = Total sales commissions + Fixed Postion of sales representatives' compensation = $15,000 & $ 12,500 = $27,500 The total indisect selling expense is the advertising cost of $33,750. (3b)