Total manufacturing overhead cost (a)
$28,500
Number of units produced (b)
6,000
Manufacturing overhead per unit (a) ÷ (b)
$4.75
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed manufacturing overhead cost by 5,000 units.
h.
Selling price per unit
$22.90
Direct materials
$5.30
Direct labor
3.65
Variable manufacturing overhead
1.50
Sales commissions
0.50
Variable administrative expense
0.50
Variable cost per unit sold
11.45
Contribution margin per unit
$11.45
i.
Direct materials
$5.30
Direct labor
3.65
Direct manufacturing cost per unit (a)
$8.95
Number of units produced (b)
4,000
Total direct manufacturing cost (a) × (b)
$35,800
j
Total variable manufacturing overhead cost
($1.50 per unit × 4,000 units)
$6,000
Total fixed manufacturing overhead cost
($3.90 per unit × 5,000 units*)
19,500
Total indirect manufacturing cost
$25,500
*The average fixed manufacturing overhead cost per unit was determined by dividing the total fixed manufacturing overhead cost by 5,000 units.
k.
Direct materials
$5.30
Direct labor
3.65
Variable manufacturing overhead
1.50
Incremental manufacturing cost
$10.45
Difficulty: 2 Medium
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
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
276) Myklebust 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:
a. For financial reporting purposes, what is the total amount of product costs incurred to make 6,000 units?
b. For financial reporting purposes, what is the total amount of period costs incurred to sell 6,000 units?
c. If the selling price is $20.20 per unit, what is the contribution margin per unit sold?
d. If 7,000 units are produced, what is the total amount of direct manufacturing cost incurred?
e. If 7,000 units are produced, what is the total amount of indirect manufacturing cost incurred?
f. What incremental manufacturing cost will the company incur if it increases production from 6,000 to 6,001 units?
Answer:
a.
Direct materials
$6.40
Direct labor
3.80
Variable manufacturing overhead
1.60
Variable manufacturing cost per unit