Exercise 1-7 Direct and Indirect Costs [L01-1] Kubin Company\'s relevant range o
ID: 2328544 • Letter: E
Question
Exercise 1-7 Direct and Indirect Costs [L01-1] Kubin Company's relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its avera costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Pixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit 8.40 $ 5.40 2.90 6.40 4.90 $ 3.90 2.40 $1.90 Complete this question by entering your answers in the tabs below Required 1Required 2 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 27,500 units? (Round per unit values to 2 decimal places.) b. What is the total indirect manufacturing cost incurred to make 27,500 units? (Round per unit values to 2 decimal places.)Explanation / Answer
Manufacturing cost = Direct material + Direct labor + Manufacturing overhead
Cost Object - A cost object is often a product or department for which costs are accumulated or measured.
Direct cost - Direct cost are expenses that a company can easily connect to a specific cost object. A cost object may be a product, department.
Indirect cost - An indirect cost is a cost that must be allocated to a cost object because it cannot be directly traced to the cost object.
1. When the Cost Object is the Units of production
2. When the Cost Object is the Manufacturing department
In this question, the cost Object is Manufacturing department. Means it invoves calculating the cost assigned to manufacturing department to produce 17,000 units.
When the cost object is manufacturing department, whatever cost that are incurred in the manufacturing department will be considered as direct cost.
Note 1:
When the cost object is manufacturing department, the entire manufacturing cost is direct cost.
1a. DIrect Materials per unit $8.40 Direct Labor per unit $5.40 Direct Manufacturing cost per unit ($8.40 + $5.40) $13.80 Number of units produced 27,500 units Total direct manufacturing cost (27,500 units x $13.80) $379,500 1b. Variable Manufacturing Overhead per unit $2.90 Fixed Manufacturing Overhead per unit $6.20 Indirect Manufacturing Cost per Unit ($2.90 + $6.20) $9.10 Number of Units Produced 27,500 units Total Indirect Manufacturing Cost (27,500 units x $9.10) $250,250Related Questions
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