Question

Balerio Corporation's relevant range of activity is 6,000 units to 10,000 units. When it produces and sells 8,000 units, its average costs per unit are as follows: Average Cost per Unit $ 6.40 $ 3.00 $ 1.30 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense $13.20 $ 2.20 $ 1.60 $ 0.60 $ 0.50 Sales commissions Variable administrative expense Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 8,000 units? (Do not round intermediate calculations.) b. If 9,000 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.) c. If 9,000 units are sold, what is the total amount of variable costs related to the units sold? (Do not round intermediate calculations.) d. If the selling price is $18.00 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.) e. What incremental manufacturing cost will the company incur if it increases production from 8,000 to 8,001 units? (Round "Per unit" answer to 2 decimal places.) Total product cost 180,800 a b. Variable cost per unit sold 11.80 Total variable costs %24 106,200 d. Contribution margin per unit 6.20 e. Incremental manufacturing cost $ 21.647.00

Answer 1

1) Calculation of Total Product cost

Direct materials ($6.40*8000)	$51200
Direct labor ($3.00*8000)	24000
Variable manufacturing overhead ($1.30*8000)	10400
Total variable manufacturing overhead		85600
Fixed manufacturing overhead ($13.20*8000)		105600
Total product cost		$191200

2) Calculation of Variable cost per unit

Direct materials per unit	$6.40
Direct labor per unit	3.00
Variable manufacturing overhead	1.30
Sales commissions	0.60
Variable administrative expenses	0.50
Total variable cost per unit	$11.80

3) Calculation of Total variable cost

Total variable cost= Variable cost per unit*Number of units sold

= $11.80*9000= $106200

4) Calculation of Contribution margin per unit

Contribution margin per unit= Sales price per unit-Variable cost per unit

= $18.00-11.80= $6.20 per unit

5) Calculation of Incremental manufacturing cost

Direct materials per unit	$6.40
Direct labor per unit	3.00
Variable manufacturing overhead per unit	1.30
Incremental manufacturing cost per unit	$10.70