Question

The information that follows is for Nancy’s Name Tents for the year ended December 31, 2015 and

covers questions 26-31. All per unit costs below are based on the production and sale of 3,000 name tents.

The relevant range is from 0 - 3,500 units.

Sales                                                                                                    $50 sales price per name tent                              

Costs:

Variable Costs                                                Per Tent (3,000 name tents produced and sold)     

                        Direct materials                                                          8

                        Direct labor                                                                7

Manufacturing overhead                              8

Period Costs                                                               5

            Fixed Costs

                        Manufacturing overhead                                            10                               

                        Period Costs                                                              5         

1) If 10,000 tents are produced and sold, what is the product cost per tent?

2) If 15,000 tents are produced and sold, what is the product cost per tent? ​​​​​​​

3) If 2,000 tents are produced and sold, what is the product cost per tent?

​​​​​​​4) What is the fixed cost per tent at 1,000 tents (including period costs) produced and sold?

​​​​​​​5) What are total period costs at 1,000 name tents (produced and sold)? ​​​​​​​   

Answer 1

At production and sale of 3,000 units:

Variable Product Cost per unit = Direct Materials + Direct Labor + Manufacturing Overhead
Variable Product Cost per unit = $8 + $7 + $8
Variable Product Cost per unit = $23

Fixed Product Cost per unit = Manufacturing Overhead
Fixed Product Cost per unit = $10

Fixed Product Cost = Fixed Product Cost per unit * Number of units produced
Fixed Product Cost = $10 * 3,000
Fixed Product Cost = $30,000

Variable Period Costs per unit = $5
Fixed Period Costs per unit = $5

Fixed Period Cost = Fixed Period Cost per unit * Number of units produced
Fixed Period Cost = $5 * 3,000
Fixed Period Cost = $15,000

Answer 1.

At production and sale of 10,000 units:

Total Product Cost = Variable Product Cost per unit * Number of units produced + Fixed Product Cost
Total Product Cost = $23 * 10,000 + $30,000
Total Product Cost = $260,000

Product Cost per unit = Total Product Cost / Number of units produced
Product Cost per unit = $260,000 / 10,000
Product Cost per unit = $26

Answer 2.

At production and sale of 15,000 units:

Total Product Cost = Variable Product Cost per unit * Number of units produced + Fixed Product Cost
Total Product Cost = $23 * 15,000 + $30,000
Total Product Cost = $375,000

Product Cost per unit = Total Product Cost / Number of units produced
Product Cost per unit = $375,000 / 15,000
Product Cost per unit = $25

Answer 3.

At production and sale of 2,000 units:

Total Product Cost = Variable Product Cost per unit * Number of units produced + Fixed Product Cost
Total Product Cost = $23 * 2,000 + $30,000
Total Product Cost = $76,000

Product Cost per unit = Total Product Cost / Number of units produced
Product Cost per unit = $76,000 / 2,000
Product Cost per unit = $38

Answer 4.

At production and sale of 1,000 units:

Total Fixed Costs = Fixed Product Cost + Fixed Period Cost
Total Fixed Costs = $30,000 + $15,000
Total Fixed Costs = $45,000

Fixed Cost per unit = Total Fixed Costs / Number of units produced
Fixed Cost per unit = $45,000 / 1,000
Fixed Cost per unit = $45

Answer 5.

At production and sale of 1,000 units:

Total Period Costs = Variable Period Cost per unit * Number of units produced + Fixed Period Cost
Total Period Costs = $5 * 1,000 + $15,000
Total Period Costs = $20,000