The costs per unit and period for Milligan Exploration for all relevant ranges o
ID: 2332085 • Letter: T
Question
The costs per unit and period for Milligan Exploration for all relevant ranges of activity is as follows:
Cost per Unit Cost per Period
Selling price per unit 14.25
Direct materials 5.00
Direct labor 2.90
Variable manufacturing overhead 1.25
Fixed manufacturing overhead - $21,000
Sales commissions 1.00
Variable administrative expense 0.55
Fixed selling and administrative exp. $7,500
1. If Milligan produces 4,200 units, what is the total amount of direct manufacturing cost incurred?
2. If 5,000 units are produced by Milligan, what is the total amount of indirect manufacturing overhead cost incurred?
3. What is Milligan’s contribution margin per unit sold?
Explanation / Answer
1 Calculate total amount of direct manufacturing cost Number of units cost per period Amount Direct materials 4200 5 21000 Direct labor 4200 2.9 12180 variable manufacturing overhead 4200 1.25 5250 Fixed manufacturing overhead 21000 Total amount of direct manufacturing cost 59430 2 Indirect manufacturing overhead cost (given) 21000 Indirect manufacturing overhead cost includes depreciation, repairs and maintenance,electricity, supervisor salaries , quality cost and other factory cost associated with manufacturing and it is period cost , will not change according to change in the production, even if 5000 units are produced, manufacturing cost remains same. 3 Calculate contribution margin per unit sold for milliganExploration cost per unit Sales 14.25 Direct materials -5 Direct labor -2.9 variable manufacturing overhead -1.25 5.1 less: variable selling and administrative expenses sales commission -1 varaible admin expenses -0.55 Contribution margin 3.55
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