Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
210) Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials
$
6.60
Direct labor
$
3.65
Variable manufacturing overhead
$
1.65
Fixed manufacturing overhead
$
2.80
Fixed selling expense
$
0.70
Fixed administrative expense
$
0.40
Sales commissions
$
0.50
Variable administrative expense
$
0.45
If 4,000 units are sold, the variable cost per unit sold is closest to:
A) $16.75
B) $12.85
C) $11.90
D) $14.70
Answer: B
Explanation:
Direct materials
$
6.60
Direct labor
3.65
Variable manufacturing overhead
1.65
Sales commissions
0.50
Variable administrative expense
0.45
Variable cost per unit sold
$
12.85
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
211) Barredo Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials
$
6.60
Direct labor
$
3.65
Variable manufacturing overhead
$
1.65
Fixed manufacturing overhead
$
2.80
Fixed selling expense
$
0.70
Fixed administrative expense
$
0.40
Sales commissions
$
0.50
Variable administrative expense
$
0.45
If 4,000 units are sold, the total variable cost is closest to:
A) $67,000
B) $47,600
C) $51,400
D) $58,800
Answer: C
Explanation:
Direct materials
$
6.60
Direct labor
3.65
Variable manufacturing overhead
1.65
Sales commissions
0.50
Variable administrative expense
0.45
Variable cost per unit sold
$
12.85
Variable cost per unit sold (a)
$
12.85
Number of units sold (b)
4,000
Total variable costs (a) × (b)
$
51,400
Difficulty: 1 Easy
Topic: Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
212) Varela Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials
$
5.95
Direct labor
$
3.30
Variable manufacturing overhead
$
1.60
Fixed manufacturing overhead
$
3.00
Fixed selling expense
$
0.50
Fixed administrative expense
$
0.40
Sales commissions
$
1.50
Variable administrative expense
$
0.50
For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:
A) $43,400
B) $55,400
C) $59,400
D) $12,000
Answer: B
Explanation:
Direct materials
$
5.95
Direct labor
3.30
Variable manufacturing overhead
1.60
Variable manufacturing cost per unit
$
10.85