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 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. Round "Per unit" answer to 2 decimal places.) 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.)

Answer 1

Answer:

a.	Total product cost	306000
b.	Variable cost per unit sold	12.80
c.	Total variable cost	166400
d.	Contribution margin per unit	5.60
e	Incremental manufacturing cost	11.90

Working note:

a.	Direct materials	6.80
	Direct labor	3.40
	Variable manufacturing overhead	1.70
	Variable manufacturing Cost per unit	11.90
	Total variable manufacturing cost (11.90 * 12000 units)	142800
	Total fixed manufacturing overhead cost (13.60 * 12000 units)	163200
	Total product cost	306000
b.	Direct materials	6.80
	Direct labor	3.40
	Variable manufacturing overhead	1.70
	Sales commission	0.50
	Variable administrative expenses	0.40
	Variable cost per unit sold	12.80
c.	Total variable cost	166400
	(No. of units sold * Variable cost per unit sold)
	(13000 * 12.80)
d.	Selling price per unit	18.40
	Variable cost per unit sold	12.80
	Contribution margin per unit	5.60
e.	Direct material	6.80
	Direct labor	3.40
	vaariable manufacturing overhead	1.70
	Incremental manufacturing cost per unit	11.90

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