Question

The following data apply to the provision of psychological testing services: Sales price per unit (1...

The following data apply to the provision of psychological testing services: Sales price per unit (1 unit = 1 test plus feedback to client) $ 330 Fixed costs (per month): Selling and administration 20,000 Production overhead (e.g., rent of testing facilities) 20,000 Variable costs (per test): Labor for oversight and feedback 135 Outsourced test analysis 17 Materials used in testing 4 Production overhead 14 Selling and administration (e.g., scheduling and billing) 17 Number of tests per month 2,000 tests Required: Calculate the amount for each of the following (one unit = one test) if the number of tests is 2,000 per month. Also calculate if the number of tests decreases to 1,250 per month. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)

2,000 Tests 1,250 Tests

a. Variable production cost per unit.

b. Variable cost per unit. c. Full cost per unit.

d. Full absorption cost per unit.

e. Prime cost per unit.

f. Conversion cost per unit.

g. Contribution margin per unit.

h. Gross margin per unit.

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Answer #1

a. Computation of variable production cost per unit is as follows: Particulars Amount 2 Matrial used in testing 3 Labor for oversight and feedback 4 Outsourced test analysis 5 Production overheads $4.00 $135.00 $17.00 $14.00 7 Variable production cost per unitS170.00 The formula is shown below: Particulars Amount 2 Matrial used in testing 3 Labor for oversight and feedback 4 Outsourced test analysis 5 Production overheads 135 17 14 7 Variable production cost per unit-SUM(B2:B5b. Computation of variable cost per unit is as follows: Particulars Amount S4.00 3 Labor for oversight and feedback S135.00 $17.00 $14.00 $17.00 2 Matrial used in testing 4 5 6 Outsourced test analysis Production overheads Selling and administration costs 8 Total variable cost per unit $187.00 The formula is shown below: Particulars Amount 2 3 4 5 6 Matrial used in testing Labor for oversight and feedback Outsourced test analysis Production overheads Selling and administration costs 135 17 14 17 8 Total variable cost per unit SUM(B2:B6)c. Computation of total cost per unit is as follows: Particulars Amount 2 Number of units 3 Variable costs: 4 Matrial used in testing 5 Labor for oversight and feedback 6 Outsourced test analysis 7 Production overheads 8 Selling and administration costs 9 Total variable cost per unit 10 11 Fixed Costs: 12 Production overheads 13 Selling and administrative overheads 14 Total Fixed Cost per unit 2,000 1,250 $4.00 $135.00 S135.00 $17.00S17.00 $14.00$14.00 S17.00S17.00 S187.00$187.00 S4.00 $10.00$16.00 S10.00S16.00 S20.00S32.00 16 Total cost per unit S207.00 S219.00The formulas are shown below: Particulars Amount 1250 2 Number of units 3 Variable costs: 4 Matrial used in testing 5 Labor fd. Computation of full absorption cost per unit is as follows: Particulars Amount 2,0001.250 S4.00 S4.00 4 Labor for oversight and feedback S135.00 S135.00 $17.00 S17.00 $14.00 S14.00 S10.00 S16.00 2 Number of units 3 Matrial used in testing 5 Outsourced test analysis 6 Variable production overheads 7 Fixed production overheads 9 Total variable cost per unit S1s0.00 $186.00 The formulas are shown below: Particulars Amount 1250 2 Number of units 3 Matrial used in testing 4 Labor for oversight and feedback 135 5 Outsourced test analysis 6 Variable production overheads 14 7 Fixed production overheads 2000 135 14 20000/B2 20000/C2 9 Total variable cost per unit SUM(B3:B7)-SUM(C3: Note: Fixed manufacturing overheads and variable costs have not been added in absorption cost per unit because these are considered as period costs under the absorption costing approach.

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