Question

Kubin Company’s relevant range of production is 25,000 to 33,500 units. When it produces and sells 29,250 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.50
Direct labor	$	5.50
Variable manufacturing overhead	$	3.00
Fixed manufacturing overhead	$	6.50
Fixed selling expense	$	5.00
Fixed administrative expense	$	4.00
Sales commissions	$	2.50
Variable administrative expense	$	2.00

Required:

2. Assume the cost object is the Manufacturing Department and that its total output is 29,250 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department?

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

2. Assume the cost object is the Manufacturing Department and that its total output is 29,250 units.

a. How much total manufacturing cost is directly traceable to the Manufacturing Department? (Round per unit values to 2 decimal places.)

b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?

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	2a. Direct materials per unit $8.50 Direct labor per unit 5.50 Variable manufacturing overhead per unit 3.00 Fixed manufacturing overhead per unit 6.50 Total manufacturing cost per unit $23.50 Number of units sold 29,250 Total direct costs $687,375 2b. Total indirect costs

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $117,000 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.

a. When the company sells 29,250 units, what is the total direct selling expense that can be readily traced to individual sales representatives?

b. When the company sells 29,250 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $117,000 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.

a. When the company sells 29,250 units, what is the total direct selling expense that can be readily traced to individual sales representatives? (Round per unit value to 2 decimal places.)

b. When the company sells 29,250 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?

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	3a. Sales commissions per unit Number of units sold Total sales commission Fixed portion of sales representatives’ compensation Total direct selling expense 3b. The total indirect selling expense

Answer 1

2a. Direct materials per unit	8.50
Direct labor per unit	5.50
Variable manufacturing overhead per unit	3.00
Fixed manufacturing overhead per unit	6.50
Total manufacturing costs per unit	23.50
Number of units sold	29250
Total direct costs	687,375
2b. Total indirect costs	0

Explanation for 2b:

None of the manufacturing costs should be treated as indirect costs when the cost object is the Manufacturing Department.

Sales commission per unit	2.50
Number of units sold	29250
Total sales commission	73125
Fixed portion of sales representatives' compensation (29250*5)-117000	29250
Total direct selling expense	102375
3b. Total indirect selling expense	117000

Explanation for 3b:

The total indirect selling expense that cannot be traced to individual sales representatives is $117000. The advertising expenditures cannot be traced to specific sales representatives.