Hixson Company manufactures and sells one product for $34 per unit. The company

Question

Hixson Company manufactures and sells one product for $34 per unit. The company maintains no beginning or ending inventories and its relevant range of production is 20,000 units to 30,000 units. When Hixson produces and sells 25,000 units, its unit costs 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 $1.00 $6.00 $3.50 $2.50 $4.00 $1.00 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 25,000 units? What is the total amount of period costs incurred to sell 25,000 units? 2. If 24,000 units are produced, what is the variable manufacturing cost per unit produced? What is the average fixed manufacturing cost per unit produced? (Round your answers to 2 decimal places.) 3. If 26,000 units are produced, what is the variable manufacturing cost per unit produced? What is the average fixed manufacturing

Explanation / Answer

1)Product cost per unit : Direct material +direct labor +variable overhead

            = 8+5+1

             = 14

Total Product cost : 25000*14= $ 350000

Period cost : [25000*6]fixed manufacturing overhead + [25000(3.5+4)]selling expense+[25000(2.5+1) ]administrative expense

      = 150000+ 187500+87500

          = 425000

2)Variable manufacturing cost :8+5+1= $ 14 per unit

Fixed manufacturing cost : 6*25000 = 150000

Average fixed manufacturing cost per unit :150000/24000 = $ 6.25 per unit

3)Variable manufacturing cost :8+5+1= $ 14 per unit

Average fixed manufacturing cost per unit :150000/26000 = $ 5.77per unit

4)Direct cost :direct material +direct labor

        =[27000*8]+[27000*5]

          = 216000+ 135000

           = 351000

Indirect manufacturing cost =Variable manufacturing overhead +fixed manufacturing overhead

           = [27000*1]+150000

          = 27000+150000

            = 177000

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