Question

Question 2 – Comprehensive problem: Scoops Ahoy, Inc. is a manufacturer that produces ice cream. Its relevant range of production for 2019 is 101,000 to 106,000 pints of ice cream. When it produces and sells 104,000 pints, its average costs per unit are as follows:

		Average cost per pint
Direct materials	$	0.35
Direct labor	$	1.19
Variable manufacturing overhead	$	0.23
Fixed manufacturing overhead	$	0.27
Variable selling and administrative expenses	$	0.09
Fixed selling and administrative expenses	$	0.13

1. What is the total cost of producing and selling 104,000 pints of ice cream? What is the total cost of producing and selling 105,000 pints of ice cream?   What is the total cost of producing and selling 102,000 pints of ice cream?

2. What is the total variable manufacturing cost of producing and selling 104,000 pints of ice cream? What is the total variable manufacturing cost of producing and selling 105,000 pints of ice cream?   What is the total variable manufacturing cost of producing and selling 102,000 pints of ice cream?

3. If 105,000 pints of ice cream are produced and sold, what is the fixed cost per unit produced and sold?   If 102,000 pints of ice cream are produced and sold, what is the fixed cost per unit produced and sold?

4. If 105,000 pints of ice cream are produced and sold, what is the non-manufacturing cost per unit produced and sold?   If 102,000 pints of ice cream are produced and sold, what is the non-manufacturing cost per unit produced and sold?

5. If the selling price is $3.50 per pint of ice cream, what is the contribution margin per unit when producing and selling 105,000 pints of ice cream?   If the selling price is $3.50 per pint of ice cream, what is the contribution margin per unit when producing and selling 102,000 pints of ice cream?

Answer 1

fixed costs remains constant irrespective of production volumes.

however variable costs changes with change in production.

manufacturing costs are directly related to production like material ,labor, overheads.

non manufacturing cost are indirectly related to production they cannot be attributed to particular unit like selling expense, administrative expense.

	102000		104000		105000
	per unit	total	per unit(a)	total (a)*104000	per unit (a)	total (a)*105000
Manufacturing costs
direct material	0.35	35700	0.35	36400	0.35	36750
direct labor	1.19	121380	1.19	123760	1.19	124950
variable overhead	0.23	23460	0.23	23920	0.23	24150
fixed overhead		28080	0.27	28080		28080
Total manufacturing cost	2.045$[208620/102000]	208620	2.04	212160	2.037	213930
Non Manufacturing cost
variable selling expense	0.09	9180	0.09	9360	0.09	9450
fixed selling expense		13520	0.13	13520		13520
Total non Manufacturing cost	0.2225	22700	0.22	22880	0.2188	22970
Total cost		231320		235040		236900[213930+22970]

What is the total cost of producing and selling 104,000 pints of ice cream =235040$

What is the total cost of producing and selling 105,000 pints of ice cream =236900$

What is the total cost of producing and selling 102,000 pints of ice cream? =$231320

d.If 105,000 pints of ice cream are produced and sold, what is the non-manufacturing cost per unit produced and sold? = 0.2188$

   If 102,000 pints of ice cream are produced and sold, what is the non-manufacturing cost per unit produced and sold?

$0.2225

fixed costs remains constant irrespective of production volumes.

however variable costs changes with change in production.

manufacturing costs are directly related to production like material ,labor, overheads.

non manufacturing cost are indirectly related to production they cannot be attributed to particular unit like selling expense, administrative expense.

	102000		104000		105000
	per unit	total	per unit(a)	total (a)*104000	per unit (a)	total (a)*105000
variable expenses
direct material	0.35	35700	0.35	36400	0.35	36750
direct labor	1.19	121380	1.19	123760	1.19	124950
variable overhead	0.23	23460	0.23	23920	0.23	24150
Total Variable manufacturing cost		180540		184080		185850
variable selling expense	0.09	9180	0.09	9360	0.09	9450
Total variable cost	1.86	189720	1.86	193440	1.86	195300
Non Manufacturing cost
fixed overhead		28080	0.27	28080		28080
fixed selling expense		13520	0.13	13520		13520
Total fixed cost	0.4078	41600	0.4	41600	0.3962[41600/105000]	41600

What is the total variable manufacturing cost of producing and selling 104,000 pints of ice cream? 184080$

What is the total variable manufacturing cost of producing and selling 105,000 pints of ice cream? 185850$

What is the total variable manufacturing cost of producing and selling 102,000 pints of ice cream?180540$

c.

If 105,000 pints of ice cream are produced and sold, what is the fixed cost per unit produced and sold? 0.3962$

If 102,000 pints of ice cream are produced and sold, what is the fixed cost per unit produced and sold?0.4078$

e.

If the selling price is $3.50 per pint of ice cream, what is the contribution margin per unit when producing and selling 105,000 pints of ice cream?

contribution margin = sales- variable cost

$3.50-1.86$ variable cost

=1.64$

If the selling price is $3.50 per pint of ice cream, what is the contribution margin per unit when producing and selling 102,000 pints of ice cream?

3.50-1.86

=1.64$ per unit