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:

  

	Average Cost per Unit
Direct materials	$	8.30
Direct labor	$	5.30
Variable manufacturing overhead	$	2.80
Fixed manufacturing overhead	$	6.30
Fixed selling expense	$	4.80
Fixed administrative expense	$	3.80
Sales commissions	$	2.30
Variable administrative expense	$	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?

Answer 1

Answer

Requirement	Answer	Explanation
1	$           20.50	Variable Cost per unit is same irrespective of units
2	$           20.50	Variable Cost per unit is same irrespective of units
3	$ 471,500.00	$ 20.50 * 23,000
4	$ 563,750.00	$ 20.50 * 27,500
5	$           16.36	$ 376,225/23000
6	$           13.68	$ 376,225/27500
7	$      376,225	Total Fixed Costs remain same in totality
8	$      376,225	Total Fixed Costs remain same in totality

Calculations:

Variable Costs are measured on per unit basis. Fixed costs are measured on total basis.

Direct materials	$       8.30
Direct labor	$       5.30
Variable manufacturing overhead	$       2.80
Sales commissions	$       2.30
Variable administrative expense	$       1.80
Variable Cost per unit	$     20.50
Fixed manufacturing overhead	$       6.30
Fixed selling expense	$       4.80
Fixed administrative expense	$       3.80
Fixed manufacturing Cost per Unit	$     14.90
Units	25,250
Total Fixed Costs	$ 376,225

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