Kubin Company\'s relevant range of production is 20,000 to 23,000 units. When it
ID: 2618225 • Letter: K
Question
Kubin Company's relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Amount per Unit $ 8.00 5.00 2.50 4.00 4.50 3.50 2.00 1.50 Requirec 1. If 20,000 units are produced and sold, what is the variable cost per unit produced and sold? 2. If 23,000 units are produced and sold, what is the variable cost per unit produced and sold? 3. If 20,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 4. If 23,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 5. If 20,000 units are produced, what is the average fixed manufacturing cost per unit produced? 6. If 23,000 units are produced, what is the average fixed manufacturing cost per unit produced? 7. If 20,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? 8. If 23,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? (Round per unit values to 2 decimal places.)Explanation / Answer
In this question, basically the conscept we should be cognizant about is the fact that
1. Fixed cost per unit would always be fixed and would get divided equally among the number of units produced.
2. Variable cost is a cost which is added along with additional production of units.
Coming to answering the questions -
1. If 20,000 units were produced, variable cost per unit would be (add everything whichis not fixed
= Direct material +direct labor + Variable manufauring overhead + Sales commision +variable admin expense
=$8 + $5 + $2.5 + $2 + $1.5
= $ 19.00
2. If 23,000 units were produced, variable cost per unit would be as below (essentially it would be same - refer to 2nd point at the start of answer)
= Direct material +direct labor + Variable manufauring overhead + Sales commision +variable admin expense
=$8 + $5 + $2.5 + $2 + $1.5
= $ 19.00
3. Total amount of variable cost if 20000 units were produced.
= 20000 * $19.00 = $380,000
4. Total amount of variable cost if 23000 units were produced
= 23000 * $19.00 = $437,000
5. Avg fixed manufacturing cost (if 20000 units were produced)
=21500 * 4 / 20000
=$ 4.30
6. Avg fixed manufacturing cost (if 23000 units were produced)
=21500 * 4 / 23000
=$ 3.74
7. Total amount of fised manufacturing overhead (if 20000 units are produced)
=21500 * 4 = $ 86,000 (total fixed cost for any componenet would be same irrespective of number of units produced)
8. Total amount of fised manufacturing overhead (if 23000 units are produced)
=21500 * 4 = $ 86,000 (total fixed cost for any componenet would be same irrespective of number of units produced)
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