Question

Dobosh Corporation has provided the following information:

• Direct materials $7.05 per unit
• Direct labor $3.65 per unit
• Variable manufacturing overhead $1.60 per unit
• Fixed manufacturing overhead $113,400 per period
• Sales commissions $1.50 per unit
• Variable administrative expense $0.55 per unit
• Fixed selling and administrative expense $36,450 per period

Required:

a. For financial reporting purposes, what is the total amount of product costs incurred to make 9,000 units?

b. For financial reporting purposes, what is the total amount of period costs incurred to sell 9,000 units?

c. If 9,000 units are sold, what is the variable cost per unit sold? (1 Mark)

Answer 1

ans) a) Calculation of total product cost

Direct material cost = 9,000 units * $ 7.05 per units = $ 63,450

Add: Direct labour cost = 9,000 units * $ 3.65 per units =   $ 32,850

Add : Variable manufacturing overhead = 9,000 units * $ 1.60 per units = $14400

Add: Fixed manufacturing overhead = $1,13,400

Total product cost    $ 2,24,100

  

b) b) Calculation of total period cost

Sales commissions = 9,000 units * $ 1.50 per unit = $ 13,500

Add:    Variable administrative expenses = 9,000 units * $ 0.55 per unit = $ 4950

Add: Fixed selling and administrative expenses =   $ 36,450  

Total period cost $ 54,900  

c) Calculation of Variable cost per unit sold

variable cost per unit = total variable cost / no: of unit sold

total variable cost = direct material + direct labour + variable manufacturing overhead + sales commission + variable administrative expenses

= $ 63,450 + $ 32,850 + $ 14,400 +$ 13,500 + $ 4950

= $ 1,29,150

Variable cost per unit = $ 1,29,150 / 9000 units

= $ 14.35 per unit