h. If 8,000 units are produced, what is the total amount of indirect manufacturing costs incurred?
i. What incremental manufacturing cost will the company incur if it increases production from 9,000 to 9,001 units?
Answer:
a.
Direct materials
$7.05
Direct labor
3.65
Variable manufacturing overhead
1.60
Variable manufacturing cost per unit
$12.30
Total variable manufacturing cost
($12.30 per unit × 9,000 units produced)
$110,700
Total fixed manufacturing overhead cost
113,400
Total product (manufacturing) cost
$224,100
b.
Sales commissions
$1.50
Variable administrative expense
0.55
Variable selling and administrative expense per unit
$2.05
Total variable selling and administrative expense
($2.05 per unit × 9,000 units sold)
$18,450
Total fixed selling and administrative expense
36,450
Total period (nonmanufacturing) cost
$54,900
c.
Direct materials
$7.05
Direct labor
3.65
Variable manufacturing overhead
1.60
Sales commissions
1.50
Variable administrative expense
0.55
Variable cost per unit sold
$14.35
d.
Variable cost per unit sold (a)
$14.35
Number of units sold (b)
10,000
Total variable costs (a) × (b)
$143,500
e.
Total variable manufacturing overhead cost
($1.60 per unit × 10,000 units)
$16,000
Total fixed manufacturing overhead cost
113,400
Total manufacturing overhead cost (a)
$129,400
f.
Selling price per unit
$21.60
Direct materials
$7.05
Direct labor
3.65
Variable manufacturing overhead
1.60
Sales commissions
1.50
Variable administrative expense
0.55
Variable cost per unit sold
14.35
Contribution margin per unit
$7.25
g.
Direct materials
$7.05
Direct labor
3.65
Direct manufacturing cost per unit (a)
$10.70
Number of units produced (b)
8,000
Total direct manufacturing cost (a) × (b)
$85,600
h.
Total variable manufacturing overhead cost
($1.60 per unit × 8,000 units)
$12,800
Total fixed manufacturing overhead cost
113,400
Total indirect manufacturing cost
$126,200
i.
Direct materials
$7.05
Direct labor
3.65
Variable manufacturing overhead
1.60
Incremental manufacturing cost
$12.30
Difficulty: 1 Easy
Topic: Cost Classifications for Assigning Costs to Cost Objects; Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior; Cost Classifications for Decision Making; Using Different Cost Classifications for Different Purposes
Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.; 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.; 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Apply