Question

1. Pennyback Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are as follows:

		Average Cost per Unit
	Direct materials	$6.40
	Direct labor	$3.80
	Variable manufacturing overhead	$1.60
	Fixed manufacturing overhead	$3.00
	Fixed selling expense	$0.75
	Fixed administrative expense	$0.60
	Sales commissions	$1.50
	Variable administrative expense	$0.45

Required

For financial reporting purposes, what is the total amount of product costs incurred to make 6,000 units?

For financial reporting purposes, what is the total amount of period costs incurred to sell 6,000 units?

If the selling price is $20.20 per unit, what is the contribution margin per unit sold?

If 7,000 units are produced, what is the total amount of direct manufacturing cost incurred?

If 7,000 units are produced, what is the total amount of indirect manufacturing cost incurred?

fWhat incremental manufacturing cost will the company incur if it increases production from 6,000 to 6,001 units?

Answer 1

a
Direct materials	38400	=6000*6.4
Direct labor	22800	=6000*3.8
Variable manufacturing overhead	9600	=6000*1.6
Fixed manufacturing overhead	18000	=6000*3
Total amount of product costs	88800
b
Fixed selling expense	4500	=6000*0.75
Fixed administrative expense	3600	=6000*0.6
Sales commissions	9000	=6000*1.5
Variable administrative expense	2700	=6000*0.45
Total amount of period costs	19800
c
Selling price	20.20
Less: Variable costs
Direct materials	6.40
Direct labor	3.80
Variable manufacturing overhead	1.60
Sales commissions	1.50
Variable administrative expense	0.45
Total variable costs per unit	13.75
Contribution margin per unit sold	6.45
d
Direct materials	44800	=7000*6.4
Direct labor	26600	=7000*3.8
Total amount of direct manufacturing cost	71400
e
Variable manufacturing overhead	11200	=7000*1.6
Fixed manufacturing overhead	18000	=6000*3
Total amount of indirect manufacturing cost	29200
f
Direct materials	6.40
Direct labor	3.80
Variable manufacturing overhead	1.60
Incremental manufacturing cost	11.80