Question

Balerio Corporation's relevant range of activity is 10,000 units to 14,000 units. When it produces and sells 12,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit $ 6.80 $ 3.40 $ 1.70 $13.60 $ 2.40 $ 2.00 $ 0.50 $ 0.40 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 12,000 units? (Do not round intermediate calculations.) b. If 13,000 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.) c. If 13,000 units are sold, what is the total amount of variable costs related to the units sold? (Do not round intermediate calculations.) d. If the selling price is $18.40 per unit, what is the contribution margin per unit sold? (Round "Per unit" answer to 2 decimal places.) e. What incremental manufacturing cost will the company incur if it increases production from 12,000 to 12,001 units? (Round "Per unit" answer to 2 decimal places.) a. Total product cost b. Variable cost per unit sold C. Total variable costs d. Contribution margin per unit e. Incremental manufacturing cost

Answer 1

Computation of Total Product Cost
Direct Materials(12000*$6.80)	$81,600
Direct labor(12000*$3.40)	$40,800
Variable manufacturing overhead(12000*$1.70)	$20,400
Direct labor(12000*$13.60)	$163,200
Total Product Cost	$306,000
Computation of Variable cost per unit
Direct material per unit	$6.80
Direct labor per unit	$3.40
Variable manufacturing overhead per unit	$1.70
Sales commission per unit	$0.50
Variable administrative expense per unit	$0.40
Variable cost per unit	$12.80
Computation of Total Variable Cost
No. of units produced and sold	13000
Variable cost per unit	$12.80
Total Variable Cost(13000*$12.80)	$166,400
Computation of Contribution margin per unit
Sales price per unit	$18.40
Less:Variable cost per unit	$12.80
Contribution margin per unit	$5.60
Computation of Incremental Manufacturing cost
Direct Materials	$6.80
Direct Labor	$3.40
Variable manufacturing OH	$1.70
Incremental Manufacturing cost	$11.90