Question

Use the information below to answer the following two questions Ginger Company's relevant range of production is 5.000 units to 13,000 units. When it produces and sells 10,000 units, ils average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling experie Fixed administrative expense Sales commissions Variable administrative expense Average Cost $ 4.80 S 3.50 S 1.30 S 3.00 S 2.50 S 1.00 $0.50 Molt= u goverhead 2. If 6.250 units are produced, what is the manufacturing overhead cost per unit incurred to support this level of production? S14.10. per unit 3x10.5 = 3an $6,88 per unit $6.10 per unit 1:3x 6230= firs D $4.30 per unit E. None of the ben 42 = 38175 bro 3 116.250 units are produced and sold the company will incur 560,000 in total period costs. How much is the Variable administrative expense per unit? A $2.20 per unit . $3.50 per unit C. $4.00 per unit D. 55.60 per unit E. None of the above

please show details. thank you

Answer 1

2) Correct Option C) $6.10 per unit.

Fixed Cost = 10,000 * Fixed manufacturing overhead per unit

= 10,000 * $3.00

= $30,000

The amount of fixed manufacturing overhead will remain same , only per unit cost will be changed as per the units produced.So for 6,250 units the fixed manufacturing overhead per unit = $30,000 / 6,250 = $4.80

Variable manufacturing overhead per unit = $1.30

So Manufacturing overhead cost per unit = Fixed + Variable

= $4.80 + $1.30 = $6.10 per unit

3) Correct Option B) $3.50 per unit

Periodic cost($60,000) = Fixed Selling expense + Fixed administrative expense + Sales commission + Variable administrative expense

Fixed Selling Expense = 10,000 * $2.50 = $25,000

Fixed Administrative expense = 10,000 * $1.00 = $10,000

Sales Commission = 6,250 * $0.50 = $3,125

Variable Administrative Expense = $60,000 - ($25,000 + $10,000 + $3,125)

= $21,875

Variable Administrative Expense per unit = $21,875 / 6,250

= $3.50 per unit

[NOTE: Fixed cost's amount will remain same for all level of output , it changes for per unit according to the output level]