Question

TB Problem Qu. 1-275 Saxbury Corporation's relevant range of activity ... Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,600 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhead Fixed selling expense Pixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit $5.50 $ 3.65 $ 1.80 $ 3.60 $ 0.80 $ 0.65 $ 0.55 $ 0.55 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 5,600 units? b. For financial reporting purposes, what is the total amount of period costs incurred to sell 5,600 units? c. If 6,600 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.) d. If 6,600 units are sold, what is the total amount of variable costs related to the units sold? e. If 6,600 units are produced, what is the average fixed manufacturing cost per unit produced? (Round "Per unit" answer to 2 decimal places.) f. If 6,600 units are produced, what is the total amount of fixed manufacturing cost incurred? g. If 6,600 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis? (Round "Per unit" answer to 2 decimal places.) h. If the selling price is $23.00 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.) 1. If 4,600 units are produced, what is the total amount of direct manufacturing cost incurred? J. If 4,600 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 5,600 to 5,601 units? (Round "Per unit" answer to 2 decimal places.)

Answer 1

a.	Total product cost=Units produced*Unit product cost
	Unit product cost:
				$
	Direct materials			5.5
	Direct labor			3.65
	Variable manufacturing overhead			1.8
	Fixed manufacturing overhead			3.6
	Total			14.55
	Total product cost=5600*14.55=$ 81480
b.	Total period costs:
	Total period cost=Units sold*Period cost per unit
	Period cost per unit:
				$
	Fixed selling expenses			0.8
	Fixed administrative expenses			0.65
	Sales commissions			0.55
	Variable administrative expense			0.55
	Total			2.55
	Total period cost=5600*2.55=$ 14280
c.	Variable cost per unit:
				$
	Direct materials			5.5
	Direct labor			3.65
	Variable manufacturing overhead			1.8
	Sales commissions			0.55
	Variable administrative expense			0.55
	Total			12.05
d.	Total variable costs=units sold*Variable cost per unit=6600*12.05=$ 79530
e.	Total fixed manufacturing overhead is fixed for all levels of production
	Fixed manufacturing overhead=5600*3.60=$ 20160
	Average fixed manufacturing cost per unit=Total fixed manufacturing overhead/Units produced=20160/6600=$ 3.05
f.	Total fixed manufacturing cost=fixed manufacturing overhead=$ 20160
g.	Total manufacturing overhead:
						$
	Variable manufacturing overhead			(6600*1.80)		11880
	Fixed manufacturing overhead					20160
	Total					32040
	Manufacturing overhead per unit=Total manufacturing overhead/units produced=32040/6600=$ 4.85
h.	Contribution margin per unit=Selling price-Variable cost per unit=23-12.05=$ 10.95
i.	Total direct manufacturing cost incurred=Units produced*Direct manufacturing cost per unit
	Direct manufacturing cost per unit:
			$
	Direct materials		5.5
	Direct labor		3.65
	Total		9.15
	Total direct manufacturing cost incurred=4600*9.15=$ 42090

j. Indirect manufacturing costs incurred: $ Variable manufacturing overhead (4600*1.80) Fixed manufacturing overhead Total 8280 20160 28440 k. Incremental manufacturing cost: $ Direct materials Direct labor Variable manufacturing overhead Total 5.5 3.65 1.8 10.95