In: Accounting
The following data apply to the provision of psychological testing services:
Sales price per unit (1 unit = 1 test plus feedback to client) | $ | 340 | |||||||||||||||||||||||||||||||||||||||
Fixed costs (per month): | |||||||||||||||||||||||||||||||||||||||||
Selling and administration | 16,000 | ||||||||||||||||||||||||||||||||||||||||
Production overhead (e.g., rent of testing facilities) | 25,000 | ||||||||||||||||||||||||||||||||||||||||
Variable costs (per test): | |||||||||||||||||||||||||||||||||||||||||
Labor for oversight and feedback | 145 | ||||||||||||||||||||||||||||||||||||||||
Outsourced test analysis | 15 | ||||||||||||||||||||||||||||||||||||||||
Materials used in testing | 6 | ||||||||||||||||||||||||||||||||||||||||
Production overhead | 11 | ||||||||||||||||||||||||||||||||||||||||
Selling and administration (e.g., scheduling and billing) | 20 | ||||||||||||||||||||||||||||||||||||||||
Number of tests per month | 2,000 | tests | |||||||||||||||||||||||||||||||||||||||
Required: Calculate the amount for each of the following (one unit = one test) if the number of tests is 2,000 per month. Also calculate if the number of tests decreases to 1,250 per month. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.)
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a. Variable production cost per unit = Labour for oversight and feedback + Outsourced test analysis + Materials used in testing + Production overhead
= $145 + $15 + $6 + $11
= $177
b. Variable cost per unit = Labour for oversight and feedback + Outsourced test analysis + Materials used in testing + Production overhead + Selling and administration
= $145 + $15 + $6+ $11 + $20
= $197
c. Full cost per test = (variable costs + fixed costs) / number of units
For 2,000 tests = $197 + [($16,000+$25,000)/2,000]
= $217.5
For 1,250 tests = $197 + [($16,000+$25,000)/1,250]
= $229.8
d. Full absorption cost per unit = Variable production cost per unit + (production overhead/number of tests)
For 2,000 tests = $177 + ($25,000/2,000)
= $189.5
For 1,250 tests = $177 + ($25,000/1,250)
= $197
e. Prime cost per unit = Labour for oversight and feedback + Outsourced test analysis + Materials used in testing
= $145 + $15 + $6
= $166
f. Conversion cost per unit = Labour for oversight and feedback + Outsourced test analysis + Production overhead + Fixed production overhead per test
For 2,000 tests = $145 + $15 + $11 + ($25,000/2,000)
= $183.5
For 1,250 tests = $145 + $15 + $11 + ($25,000/1,250)
= $191
g. Contribution margin per unit = Sales price per unit - Variable cost per unit
= $340 - $197
= $143
h. Gross margin per unit = Sales price per unit - Full absorption cost per unit
For 2,000 tests = $340 - $189.5
= $150.5
For 1,250 tests = $340 - $197
= $143