Question

1) Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows: Average Cost per Unit I Direct materials S5.30 Direct labor $3.65 I Variable manufacturing overhead S1.50 Fixed manufacturing overhead $3.90 Fixed selling expense S0.75 IlFixed administrative expense S0.60 Sales commissions SO 50 I Variable administrative expense 50.50 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 5,000 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 5,000 units? c. If 6,000 units are sold, what is the variable cost per unit sold? d. If 6,000 units are sold, what is the total amount of variable costs related to the units sold? e. If 6,000 units are produced, what is the average fixed manufacturing cost per unit produced? f. If 6,000 units are produced, what is the total amount of fixed manufacturing cost incurred? g. If 6,000 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis? h. If the selling price is $22.90 per unit, what is the contribution margin per unit sold? i. If 4,000 units are produced, what is the total amount of direct manufacturing cost incurred? j. If 4,000 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 5,000 to 5,001 units?

Answer 1

a)

	5000 Units
Direct material	5.3*5000 = 26500
Direct labor	3.65*5000= 18250
Variable manufacturing overhead	1.5*5000= 7500
Fixed manufacturing overhead	3.9*5000= 19500
Total product cost	71750

b)

Fixed selling	.75*5000= 3750
Fixed administrative expense	.60*5000= 3000
sales commission	.5*5000= 2500
variable administrative expense	.5*5000= 2500
Total period cost	11750

c)

Direct material	5.3
Direct labor	3.65
Variable manufacturing overhead	1.5
sales commission	.50
variable administrative expense	.50
Variable cost per unit sold	11.45

d)

Total variable cost for unit sold =Unit sold* variable cost

                                 = 6000 *11.45

                                   = $ 68700

e)Average fixed manufacturing cost per unit produced = Total fixed manufacturing overhead / number of units produced

                                        = 19500/ 6000

                                       = $ 3.25 per unit produced

f)Total amount of fixed manufacturing cost at 6000 units = 19500

since total fixed manufacturing overhead remained constant within a relevant range ,it will remain same as at 5000 units amounting to 19500