Question

Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,400 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	5.30
Direct labor	$	3.55
Variable manufacturing overhead	$	1.60
Fixed manufacturing overhead	$	4.00
Fixed selling expense	$	0.70
Fixed administrative expense	$	0.55
Sales commissions	$	0.45
Variable administrative expense	$	0.45

Required:

a. For financial reporting purposes, what is the total amount of product costs incurred to make 5,400 units?

b. For financial reporting purposes, what is the total amount of period costs incurred to sell 5,400 units?

c. If 6,400 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.)

d. If 6,400 units are sold, what is the total amount of variable costs related to the units sold?

Answer 1

a) Product costs are cost which incurred directly to manufacture a product. it will include Direct material, Direct labor and manufacturing overhead

Direct material (5,400*$5.30)	$ 28,620
Direct labor (5,400*$3.55)	$ 19,170
Variable manufacturing overhead (5,400*$1.60)	$    8,640
Fixed manufacturing overhead (5,400*$4)	$ 21,600
Total product cost	$ 78,030

b) Period costs

Fixed selling expense (5,400*$0.70)	$    3,780
Fixed administrative expense (5,400*$0.55)	$    2,970
Sales commission (5,400*$0.45)	$    2,430
Variable administrative expense (5,400*$0.45)	$    2,430
Total period cost	$ 11,610

c)

Direct material	$    5.30
Direct labor	$    3.55
Variable manufacturing overhead	$    1.60
Sales commission	$    0.45
Variable administrative expense	$    0.45
Total variable cost per unit sold	$ 11.35

d)

Direct material (6,400*$5.30)	$ 33,920
Direct labor (6,400*$3.55)	$ 22,720
Variable manufacturing overhead (6,400*$1.60)	$ 10,240
Sales commission (6,400*$0.45)	$    2,880
Variable administrative expense (6,400*$0.45)	$    2,880
Total variable cost for 6,400 units	$ 72,640

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