Question

Easy Breeze company produced 100,000 units, sold 90,000 units at a selling price per unit of $450, and incurred the following manufacturing costs:

Direct Materials = $40 per unit

Direct Labor = $18 per unit

Factory overhead costs:

Variable Factory Overhead = $23 per unit

Fixed Factory overhead = $250,000

Semi-variable Factory overhead cost is $70,000. The company utilized 14,000 machine hours during this period. The following additional information is provided semi-variable factory overhead into variable and fixed factory overhead costs, using high-low method.

Cost machine hours

Jan $52,000 10,000

Feb $54,000 11,000

Mar $77,000 20,000

April $67,000 12,500

Selling and Administrative expenses information:

Variable Selling and Administrative Expenses = $22 per unit

Fixed Selling and Administrative Expenses= $122,000.

Questions:

• Total Factory variable overhead cost per unit?

• Total Factory Fixed Overhead cost per unit?

• Total manufacturing cost per unit?

• Variable costing income statement?

Answer 1

1. TOTAL FACTORY VARIABLE OVERHEAD COST PER UNIT

Particulars	$
Variable Overhead cost per unit	23.00
Variable part of Semi-Variable Factory overhead per unit	0.35
Total factory variable overhead cost per unit	23.35

Working Notes:

(i). Semi Variable cost into variable and fixed cost using high-low method

Variable cost per unit = (Highest activity cost - Lowest activity cost) / (Highest Machine hours-Lowest machine hours)

Variable cost per unit = ($77,000 - $52,000) / (20,000 - 10,000) = $2.50 per machine hour

Fixed cost = $77,000 - (20,000 machine hours * 2.50) = $27,000

(ii). Variable part of semi variable cost

Machine hours utilized = 14,000

Variable cost per machine hour = $2.50

Variable Part of semi variable cost = 14,000 machine hours * $2.50 = $35,000

Variable part of semi variable cost per unit = $35,000 / 100,000 units produced = $0.35 per unit

2. TOTAL FACTORY FIXED OVERHEAD COST PER UNIT

Particulars	$
Fixed Factory Overhead	250,000
Fixed part of semi-variable factory overhead cost	27,000
Total Factory Fixed overhead cost	277,000

Total Factory Fixed overhead cost per unit = $277,000 / 100,000 units produced = $2.77 per unit

3. TOTAL MANUFACTURING COST PER UNIT

Particulars	$
Direct Material	40.00
Direct Labor	18.00
Variable Factory overhead cost	23.35
Fixed Factory overhead cost	2.77
Total Manufacturing Overhead cost per unit	84.12

4. VARIABLE COSTING INCOME STATEMENT

*Variable cost of goods sold = $40 + $18 + $23 + $0.35 = $81.35 per unit

All the best...