Question

Kubin Company's relevant range of production is 23,000 to 27,500 units. When it produces and sells 25,250 units, its average costs per unit are as follows: Amount per Unit $ 8.30 $5.30 $ 2.80 $6.30 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense $4.80 $3.80 $2.30 $1.80 Required: 1. If 23,000 units are produced and sold, what is the variable cost per unit produced and sold? 2. If 27,500 units are produced and sold, what is the variable cost per unit produced and sold? 3. If 23,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 4. IF 27,500 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 5. If 23,000 units are produced, what is the average fixed manufacturing cost per unit produced? 6. If 27,500 units are produced, what is the average fixed manufacturing cost per unit produced? 7. If 23,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? 8. if 27,500 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? (Round per unit values to 2 decimal places.) 1. Variable cost per unit 2. Variable cost per unit 3. Total amount of variable cost 4. Total amount of variable cost 5. Average fixed manufacturing cost per unit 6. Average fixed manufacturing cost per unit Total amount of fixed manufacturing 7. overhead Total amount of fixed manufacturing 8. overhead 209,300

Answer 1

Workings:

Variable cost per unit = Sum of all Variable costs (i.e. Direct Material + Direct Labor + Direct Manufacturing Overhead + Sales Commission* + Variable Administrative Expenses)

*Sales commission is always based on unit sales and therefore, variable.

Variable cost per unit = $8.30 + $5.30 + $2.80 + $2.30 + $1.80

Variable cost per unit = $20.50

Fixed manufacturing cost/overheads = $6.30 * 25,250 units i.e. $159,075

		Solution	Formula
1.	Variable Cost per unit	$ 20.50	Calcuated above
2.	Variable cost per unit	$ 20.50	Calculated above
3.	Total amount of variable cost	$ 471,500	$ 20.50 * 23,000 units
4.	Total amount of variable cost	$ 563,750	$ 20.50 * 27,500 units
5.	Average Fixed Manufacturing cost per unit	$ 6.92	$ 159,075 / 23,000 units
6.	Average Fixed Manufacturing cost per unit	$ 5.78	$ 159,075 / 27,500 units
7.	Total amount of fixed manufacturing overheads	$ 159,075	Calculated above
8.	Total amount of fixed manufacturing overheads	$ 159,075	Calculated above

Conclusion:

Variable cost per unit remains constant per unit and changes in totality with any increase or decrease in number of units. Fixed cost remains constant in totality and changes per unit with any increase or decrease in number of uniuts produced.

Note: If you still have any doubt, feel free to ask in comment section.