Kubin Company\'s relevant range of production is 15,000 to 19,000 units When it
ID: 2329280 • Letter: K
Question
Kubin Company's relevant range of production is 15,000 to 19,000 units When it produces and sells 17,000 units, ts average costs per unit are as follows: Average Cost per Unit $7.68 4.60 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense 2.10 $ 5.60 $4.18 $ 3.18 $1.60 $1.10 Fixed administrative expense Sales commissions Variable administrative expense Required: 1 Assume the cost object is units of production a What is the total direct manufacturing cost incurred to make 17,000 units? b what is the total indirect manufacturing cost incurred to make 17,000 units? 2 Assume the cost object is the Manufacturing Department and that its total output is 17,000 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 $52.700 of ts total fixed selling expense on advertising and the remainder of the total fixed selling expense comprsed the fixed portion of the comoanvs sales representatives compensationExplanation / 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 - Total Manufacturing cost
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.
3. When the cost object is the companies various sales representives,
Direct cost and indirect cost
Out of total selling expenses of $69,700, advertisment cost is $52,700 and the remainder is incurred on sales representives.
Therefore, fixed selling expenses incurred on sales representives = $69,700 - $52,700 =$17,000
Since we cannot assign the above cost of $17,000 to a specific sales representive, this cost shall be considered as an indirect cost.
1a. DIrect Materials per unit $7.60 Direct Labor per unit $4.60 Direct Manufacturing cost per unit ($7.60 + $4.60) $12.20 Number of units produced 17,000 units Total direct manufacturing cost (17,000 units x $12.20) $207,400 1b. Variable Manufacturing Overhead per unit $2.10 Fixed Manufacturing Overhead per unit $5.60 Indirect Manufacturing Cost per Unit ($2.10 + $5.60) $7.70 Number of Units Produced 17,000 units Total Indirect Manufacturing Cost (17,000 units x $7.70) $130,900Related Questions
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