Question

Kubin Company’s relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.40
Direct labor	$	5.40
Variable manufacturing overhead	$	2.90
Fixed manufacturing overhead	$	6.40
Fixed selling expense	$	4.90
Fixed administrative expense	$	3.90
Sales commissions	$	2.40
Variable administrative expense	$	1.90

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $107,250 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.

b. When the company sells 27,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

Complete the chart

	3a. Sales commissions per unit $2.40 Number of units sold 27,500 Total sales commission $66,000 Fixed portion of sales representatives’ compensation 27,500 Total direct selling expense $93,500 3b. The total indirect selling expense

Answer 1

--Required requirement = 3 'a' and 'b'

--Requirement 3 'a' is complete and calculations are correct.

--Requirement 3 'b' asks about indirect selling expenses. These will include the advertising cost of $ 107,250 mentioned in Requirement 3 data.

--Complete requirement:

3a	Sales Commission per unit	$                        2.40
	No. of units sold	27500
	Total Sales Commission	$              66,000.00
[see note #1]	Fixed portion of sales representative compensation	$              27,500.00
	Total direct selling expense	$              93,500.00
3b	Total Indirect Selling Expense	$           107,250.00

--Note #1

Total Fixed Selling expense	[27500 units x $4.9]	$      134,750.00
Less: Spent on advertising		$      107,250.00
Fixed portion of sales representative compensation		$        27,500.00