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 costs incurred?
Answer:
a.
Direct materials
$5.20
Direct labor
3.85
Variable manufacturing overhead
1.35
Variable manufacturing cost per unit
$10.40
Total variable manufacturing cost
($10.40 per unit × 6,000 units produced)
$62,400
Total fixed manufacturing overhead cost
27,000
Total product (manufacturing) cost
$89,400
b.
Sales commissions
$0.50
Variable administrative expense
0.40
Variable selling and administrative expense per unit
$0.90
Total variable selling and administrative expense
($0.90 per unit × 6,000 units sold)
$5,400
Total fixed selling and administrative expense
9,000
Total period (nonmanufacturing) cost
$14,400
c.
Selling price per unit
$22.40
Direct materials
$5.20
Direct labor
3.85
Variable manufacturing overhead
1.35
Sales commissions
0.50
Variable administrative expense
0.40
Variable cost per unit sold
11.30
Contribution margin per unit
$11.10
d.
Direct materials
$5.20
Direct labor
3.85
Direct manufacturing cost per unit (a)
$9.05
Number of units produced (b)
7,000
Total direct manufacturing cost (a) × (b)
$63,350
e.
Total variable manufacturing overhead cost
($1.35 per unit × 7,000 units)
$9,450
Total fixed manufacturing overhead cost
27,000
Total indirect manufacturing cost
$36,450
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; 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.; 01-06 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
278) Arman 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
$6.10
Direct labor
$2.90
Variable manufacturing overhead
$1.25
Fixed manufacturing overhead
$3.00
Fixed selling expense
$1.05
Fixed administrative expense
$0.60
Sales commissions
$1.50
Variable administrative expense
$0.55
Required:
a. If 6,000 units are produced, what is the total amount of fixed manufacturing cost incurred?
b. If 6,000 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis?
c. If 4,000 units are produced, what is the total amount of direct manufacturing cost incurred?
d. If 4,000 units are produced, what is the total amount of indirect manufacturing cost incurred?
Answer:
a.