Question

Jackson Company manufactures and sells one product for $34 per unit. The company maintains no beginning or ending inventories and its relevant range of production is 20,000 to 30,000 units. When Jackson produces and sells 25,000 units, its unit costs are as follows: Per Unit Amount $8.00 $5.00 Direct materials Direct labor $1.00 $6.00 $3.50 $2.50 Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense $4.00 $1.00 Sales commissions Variable administrative expense Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 25,000 units? What is the total amount of period costs incurred to sell 25,000 units? 2. If 24,000 units are produced, what is the variable manufacturing cost per unit produced? What is the average fixed manufacturing cost per unit produced? 3. If 26,000 units are produced, what is the variable manufacturing cost per unit produced? What is the average fixed manufacturing cost per unit produced? 4. If 27,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production? 5. What total incremental manufacturing cost will Jackson incur if it increases production from 25,000 to 25,001 units? 6. What is Jackson's contribution margin per unit? What is the contribution margin ratio? 7. What is Jackson's break-even point in unit sales? What is the break-even point in dollar sales? 8. How much will Jackson's net operating income increase if it can grow production and sales from 25,000 units to 26,500 units? 9. What is Jackson's margin of safety at a sales volume of 25,000 units? 10. What is Jackson's degree of operating leverage at a sales volume of 25,000 units?

Answer 1

1.

	Per Unit
Direct materials	8.00
Direct labor	5.00
Variable manufacturing overhead	1.00
Fixed manufacturing overhead	6.00
Total per unit product cost	20.00
x Number of units	25000
Total product costs $	500000
	Per Unit
Fixed selling expense	3.50
Fixed administrative expense	2.50
Sales commissions	4.00
Variable administrative expense	1.00
Total per unit period cost	11.00
x Number of units	25000
Total period costs $	275000

2.

	Per Unit
Direct materials	8.00
Direct labor	5.00
Variable manufacturing overhead	1.00
Variable manufacturing cost per unit $	14.00

Average fixed manufacturing cost per unit = (25000 x $6)/24000 = $150000/24000 = $6.25

3. Variable manufacturing cost per unit: $14.00

The per unit variable manufacturing cost will remain unchanged with a change in volume of production.

Average fixed manufacturing cost per unit = (25000 x $6)/26000 = $150000/26000 = $5.77

The total fixed manufacturing cost will remain unchanged but the per unit cost will change with a change in volume of production.

4.

	Direct	Indirect
Direct materials (27000 x $8)	216000
Direct labor (27000 x $5)	135000
Variable manufacturing overhead (27000 x $1)		27000
Fixed manufacturing overhead (25000 x $6)		150000
Total manufacturing costs $	351000	177000

Per HOMEWORKLIB RULES the first 4 parts have been answered. Please post the remaining separately. Thank you.