Question

Kubin Company’s relevant range of production is 25,000 to 33,500 units. When it produces and sells 29,250 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 8.50 Direct labor $ 5.50 Variable manufacturing overhead $ 3.00 Fixed manufacturing overhead $ 6.50 Fixed selling expense $ 5.00 Fixed administrative expense $ 4.00 Sales commissions $ 2.50 Variable administrative expense $ 2.00 Required:

1. If 25,000 units are produced and sold, what is the variable cost per unit produced and sold?

2. If 33,500 units are produced and sold, what is the variable cost per unit produced and sold?

3. If 25,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

4. If 33,500 units are produced and sold, what is the total amount of variable cost related to the units produced and sold?

5. If 25,000 units are produced, what is the average fixed manufacturing cost per unit produced?

6. If 33,500 units are produced, what is the average fixed manufacturing cost per unit produced?

7. If 25,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production?

8. If 33,500 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production?

Answer 1

Answer with working and explanation is given below

Variable cost are those costs which varies in relation to production or sales Variable cost per unit remains same at different levels of output If 25,000 units are produced and sold Variable cost per unit Direct Material Direct Labor Variable manufacturing cost Sales commission Variable administrative expense Total variable cost per unit $8.50 $5.50 $3.00 $2.50 $2.00 $21.50 $8.50 $5.50 Variable cost per unit Direct Material Direct Labor Variable manufacturing cost Sales commission Variable administrative expense Total variable cost per unit $3.00 $2.50 $2.00 $21.50 If 25,000 units are produced and sold Total Variable cost Variable cost per unit Total Output Total Variable cost $21.50 25,000 $537,500 4 If 33,500 units are produced and sold Total Variable cost Variable cost per unit Total Output Total Variable cost $21.50 33,500 $720,250 If 25,000 units are produced Fixed manufacturing overhead Total output Average fixed manufacturing cost per unit $190,125 As calculated below 25,000 $7.61 working note: Total manufacturing fixed overhead Fixed manufacturing overhead per unit Output Fixed manufacturing overhead $6.50 29,250 $190,125 6 If 33,500 units are produced Fixed manufacturing overhead Total output Average fixed manufacturing cost per unit $190,125 As calculated above 33,500 $5.68 7 If 25,000 units are produced Total amount of fixed manufacturing overhead will remain same $190,125 Explanation: Fixed overhead will remain same at overall level irrespective of level of output 8 If 33,500 units are produced Total amount of fixed manufacturing overhead will remain same $190,125 Explanation: Fixed overhead will remain same at overall level irrespective of level of output

Variable cost are those costs which varies in relation to production or sales Variable cost per unit remains same at different levels of output If 25,000 units are produced and sold Variable cost per unit Direct Material Direct Labor Variable manufacturing cost Sales commission Variable administrative expense Total variable cost per unit $8.50 $5.50 $3.00 $2.50 $2.00 $21.50 2 If 33,500 units are produced and sold $8.50 $5.50 Variable cost per unit Direct Material Direct Labor Variable manufacturing cost Sales commission Variable administrative expense Total variable cost per unit $3.00 $2.50 $2.00 $21.50 If 25,000 units are produced and sold Total Variable cost Variable cost per unit Total Output Total Variable cost $21.50 25,000 $537,500 4 If 33,500 units are produced and sold Total Variable cost Variable cost per unit Total Output Total Variable cost $21.50 33,500 $720,250 5 If 25,000 units are produced and sold Fixed manufacturing overhead Total output Average fixed manufacturing cost per unit $190,125 As calculated below 25,000 $7.61 working note: Total manufacturing fixed overhead Fixed manufacturing overhead per unit Output Fixed manufacturing overhead $6.50 29,250 $190,125 6 If 33,500 units are produced and sold Fixed manufacturing overhead Total output Average fixed manufacturing cost per unit $190,125 As calculated above 33,500 $5.68 7 If 25,000 units are produced and sold Total amount of fixed manufacturing overhead will remain same $190,125 Explanation: Fixed overhead will remain same at overall level irrespective of level of output 8 If 33,500 units are produced and sold Total amount of fixed manufacturing overhead will remain same $190,125 Explanation: Fixed overhead will remain same at overall level irrespective of level of output