E 1-7 Direct and Indirect Costs LO1-1 Kubin Company\'s relevant range of product
ID: 2511757 • Letter: E
Question
E 1-7 Direct and Indirect Costs LO1-1 Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Average Cost per Unit Direct ntaterials . Direct labor Variable manufacturing overhead Flxed manufacturing overhead... Fbxed selling expense. Fixed administrative expense Sales commissions $7.00 $4.00 $1.50 $5.00 $3.50 $2.50 $1.00 $0.50 Required: 1. Assume the cost object is units of production: a. b. What is the total direct manufacturing cost incurred to make 20,000 units? What is the total indirect manufacturing cost incurred to make 20,000 units cost object is the Manufacturing Department and that its total output is 20,000 units. w much total manufacturing cost is directly traceable to the Manufacturing Department? w much total manufacturing cost is an indirect cost that cannot be easily traced to the 2. Assume the a. Ho b. Ho Manufacturing Department? Assume the cost object is the com that the company spent $50,000 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 20,000 units, what is the total direct selling expense that can be 3. pany's various sales representatives. Furthermore, assume readily traced to individual sales representatives? When the company sells 20,000 units, what is the total indirect selling expense that can- not be readily traced to individual sales representatives? b. Are Kubin's administrative expenses always going to be treated as indirect costs in its internal management reports? 4.Explanation / Answer
1.
a. Total direct manufacturing cost = $220,000
b. Total indirect manufacturing cost = $130,000
Working:
2.
Manufacturing overhead is the cost directly traceable to the manufacturing department = $130,000
Direct labor and direct material cost is not traceable directly to manufacturing department = $220,000
3.
a. Selling expenses that can be easily traceable to individual sales representatives = Sales commission+sales salaries = $20,000 ($1.00 x 20,000)+$20,000 ($3.50 x 20,000 - $50,000) = $40,000.
b. $50,000 advertising expense is the expense which cannot be directly traced to sales representatives.
4.
Yes. The administrative expenses are always indirect expenses, as the same cannot be directly attributed to any activity and always are supporting to the main activities.
Activity - units 20000 Per unit Total Direct Material 7.00 140000 Direct labor 4.00 80000 Total Direct manufacturing cost 220000 Variable manufacturing overhead 1.50 30000 Fixed manufacturing overhad 100000 Total indirect manufacturing cost 130000Related Questions
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