Kubin Company’s relevant range of production is 22,000 to 27,000 units. When it

Question

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: 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 $ 1.70 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?

Explanation / Answer

1. Cost Object: Units of production a. Total direct manufacturing cost incurred to make 24,500 units Per unit For 24500 units Direct materials 8.2 200900 Direct Labor 5.2 127400 Total direct mfg. costs 13.4 328300 b. Total indirect manufacturing cost incurred to make 24,500 units Per unit For 24500 units Variable MOH 2.7 66150 Fixed MOH 6.2 151900 Total indirect MOH to make 24,500 units 8.9 218050 2. Cost object: Manufacturing Department: Direct materials 8.2 200900 Direct Labor 5.2 127400 Variable MOH 2.7 66150 Fixed MOH 6.2 151900 a. Total MOH that is directly traceable to the mfg. dept. 22.3 546350 b. Total indirect manufacturing costs that cannot be easily traced to the Manufacturing Department 0 (If cost object is mfg. dept. all mfg. costs(direct& indirect, fixed & variable)   are traceable/identifiable with the dept. Indirect cost that cannot be easily traced to the Manufacturing Department Fixed administrative expense (3.70*24500) 90650 Variable administrative expense (1.70*24500) 41650 Total indirect costs that cannot be directly traced to the mfg. dept. 132300 3. Cost object:company’s various sales representatives Total Fixed selling expenses(4.7*24500) 115150 a. Total direct selling expense that can be readily traced to individual sales representatives(fixed portion of the company's sales representatives’ compensation 24500 b. Total indirect selling expense that cannot be readily traced to individual sales representatives(that spent on advertising) 90650

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