Question

Gibson Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash. 1. Acquired $790, eee of cash from the owners. 2. Purchased $350,000 of manufacturing equipment. The equipment has a $42, 000 salvage value and a four-year useful life. 3. The company started and completed 6,000 modems. Direct materials purchased and used amounted to $48 per unit. 4. Direct labor costs amounted to $33 per unit. 5. The cost of manufacturing supplies used amounted to $4 per unit. 6. The company paid $58,000 to rent the manufacturing facility. 7. Magnificent sold all 6,000 units at a cash price of $160 per unit. (Hint: It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.) 8. The sales staff was paid a $7 per unit sales commission. 9. Paid $47,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,800 salvage value and a three-year useful life. 10. Administrative expenses consisting of office rental and sal pries Required a. Based on these data, identify each cost incurred by the company as variable relative to the number of units produced and sold; and (2) product versus selling, general, and administrative (SG&A). The solution for the first item is shown as an example b. Complete the following table to indicate the product cost per unit assuming levels of production of 6,000, 7,000, 8,000 and 9,000.

Answer 1

b) Sol:

Production Levels	Per unit	6000	7000	8000	9000
Variable cost	85	510000	595000	680000	765000
Fixed cost		135000	135000	135000	135000
Total cost of goods sold		645000	730000	815000	900000
Product Cost per unit		107.5	104.2857	101.875	100

Product cost per unit for 6000 units of production = $ 107.5

Product cost per unit for 7000 units of production = $ 104.29

Product cost per unit for 8000 units of production = $ 101.88

Product cost per unit for 9000 units of production = $ 100.00

As per HOMEWORKLIB RULES I answered one of the question completely.

If you like my answer kindly hit like button.

Thankyou