Question

1A.

Paolucci Corporation's relevant range of activity is 8,700 units to 17,500 units. When it produces and sells 13,100 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	7.15
Direct labor	$	4.05
Variable manufacturing overhead	$	2.05
Fixed manufacturing overhead	$	3.80
Fixed selling expense	$	1.35
Fixed administrative expense	$	0.65
Sales commissions	$	1.30
Variable administrative expense	$	0.55

If 12,100 units are sold, the variable cost per unit sold is closest to:

Multiple Choice

• $20.90
• $13.25
• $17.05
• $15.10

1B.

Kesterson Corporation has provided the following information:

	Cost per Unit		Cost per Period
Direct materials	$	6.85
Direct labor	$	3.60
Variable manufacturing overhead	$	1.25
Fixed manufacturing overhead			$	10,400
Sales commissions	$	1.50
Variable administrative expense	$	0.50
Fixed selling and administrative expense			$	3,200

If 4,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Multiple Choice

• $5,000
• $17,400
• $15,400
• $10,400

1C.

.

Kesterson Corporation has provided the following information:

	Cost per Unit			Cost per Period
Direct materials	$	6.70
Direct labor	$	3.80
Variable manufacturing overhead	$	1.50
Fixed manufacturing overhead				$	15,200
Sales commissions	$	0.70
Variable administrative expense	$	0.75
Fixed selling and administrative expense				$	6,800

If the selling price is $20.80 per unit, the contribution margin per unit sold is closest to:

Multiple Choice

• $3.55
• $5.00
• $7.35
• $10.30

Answer 1

1A)
Since variable costs are calculated on per unit basis, because they change by variation in no of units.
Total variable cost per unit=(Direct materials+Direct labor+Variable manufacturing overheads+Sales commissions+Variable adminsitrative expenses)
7.15+4.05+2.05+1.30+0.55
$15.10
1B)
Indirect manfacturing cost = variable manfacturing cost + Fixed manfacturing cost
Variable manfacturing cost = 1.25*4000 units					$5,000
Fixed manfacturing cost =10400					$10,400
Total indirect manfacturing cost = $5000+$10400					$15,400
1C)
Total variable cost per unit=(Direct materials+Direct labor+Variable manufacturing overheads+Sales commissions+Variable adminsitrative expenses)
13.45
Selling price		20.8
Contribution margin = selling price per unit - variable cost per unit
20.8-13.45
7.35