Exercise 1-7 Direct and Indirect Costs [LO1-1] Kubin Company’s relevant range of
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Question
Exercise 1-7 Direct and Indirect Costs [LO1-1]
Kubin Company’s relevant range of production is 22,000 to 27,000 units. When it produces and sells 24,500 units, its average costs per unit are as follows:
Required:
1. Assume the cost object is units of production:
a. What is the total direct manufacturing cost incurred to make 24,500 units?
b. What is the total indirect manufacturing cost incurred to make 24,500 units?
2. Assume the cost object is the Manufacturing Department and that its total output is 24,500 units.
a. How much total manufacturing cost is directly traceable to the Manufacturing Department?
b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?
3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $90,650 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.
a. When the company sells 24,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?
b. When the company sells 24,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?
Complete this question by entering your answers in the tabs below.
2. Assume the cost object is the Manufacturing Department and that its total output is 24,500 units.
a. How much total manufacturing cost is directly traceable to the Manufacturing Department? (Round per unit values to 2 decimal places.)
b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department?
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3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $90,650 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.
a. When the company sells 24,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?
b. When the company sells 24,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $90,650 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company's sales representatives’ compensation.
a. When the company sells 24,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? (Round per unit value to 2 decimal places.)
b. When the company sells 24,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?
Average Cost per Unit Direct materials $ 8.20 Direct labor $ 5.20 Variable manufacturing overhead $ 2.70 Fixed manufacturing overhead $ 6.20 Fixed selling expense $ 4.70 Fixed administrative expense $ 3.70 Sales commissions $ 2.20 Variable administrative expense $ 1.70Explanation / Answer
Kubin Company Requirement 1 Assuming cost object is unit of production a Direct manufacturing costs Direct Materials 8.2 Direct labor 5.2 Variable manufacturing overhead 2.7 Direct manufacturing costs 16.1 Units manufactured 24500 Total direct manufacturing costs 394450 b Indirect manufacturing costs Fixed manufacturing overhead 6.2 Units manufactured 24500 Total Indirect manufacturing costs 151900 2 Assuming cost object is manufacturing department a Manufacturing costs that can be directly traceble to manufacturing department Direct Materials 8.2 Direct labor 5.2 Variable manufacturing overhead 2.7 Fixed manufacturing overhead 6.2 Manufacturing cost traceble to manufacturing department 22.3 Units manufactured 24500 Total manufacturing costs 546350 Costs that can't be directly traceble to manufacturing department Fixed selling expense 4.7 Fixed administrative expense 3.7 Sales commissions 2.2 Variable administrative expenses 1.7 costs that can not be tracable to manufacturing department 12.3 Units manufactured 24500 Total costs not traceble to manufacturing department 301350 3 Assuming cost object is sales representative a Total direct selling expenses which can be traced to sales representative Units Unit cost Costs Sales commission 24500 2.2 53900 Fixed selling expenses 24500 1 24500 unit cost attributable to sales representative '= 4.7-(90650/24500)=1 Total direct selling expenses which can be traced to sales representative 78400 b Total indirect selling expenses which can't be traced to sales representative Fixed selling expenses(Advertising) 90650 Total indirect selling expenses which can't be traced to sales representative 90650
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