Question

Kubin Company’s relevant range of production is 25,000 to 33,500 units. When it produces and sells 29,250 units, its average costs per unit are as follows: Amount per Unit Direct materials $ 8.50 Direct labor $ 5.50 Variable manufacturing overhead $ 3.00 Fixed manufacturing overhead $ 6.50 Fixed selling expense $ 5.00 Fixed administrative expense $ 4.00 Sales commissions $ 2.50 Variable administrative expense $ 2.00 Required: 1. If 25,000 units are produced and sold, what is the variable cost per unit produced and sold? 2. If 33,500 units are produced and sold, what is the variable cost per unit produced and sold? 3. If 25,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 4. If 33,500 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 5. If 25,000 units are produced, what is the average fixed manufacturing cost per unit produced? 6. If 33,500 units are produced, what is the average fixed manufacturing cost per unit produced? 7. If 25,000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? 8. If 33,500 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? (Round per unit values to 2 decimal places.)

Answer 1

Variable costs per unit remain constant at $21.50 across varying production levels. Total variable costs are calculated by multiplying the variable cost per unit by the number of units. To determine average fixed manufacturing cost per unit, we need the total fixed manufacturing overhead, which is not given.

Step-by-step explanation:

When analyzing costs in a business setting, it's important to differentiate between variable costs and fixed costs. Variable costs change with the level of output, whereas fixed costs remain constant within the relevant range of production.

To address the student's questions:

1. The variable cost per unit produced and sold does not change with the level of production in the relevant range, so it's the same for 25,000 units and 33,500 units: Direct materials ($8.50) + Direct labor ($5.50) + Variable manufacturing overhead ($3.00) + Sales commissions ($2.50) + Variable administrative expense ($2.00) = $21.50.
2. Since variable costs per unit remain constant, for both levels of production, the variable cost per unit is $21.50.
3. The total variable cost for 25,000 units produced and sold is 25,000 units * $21.50 variable cost per unit = $537,500.
4. Similarly, the total variable cost for 33,500 units produced and sold is 33,500 units * $21.50 variable cost per unit = $720,250.
5. The average fixed manufacturing cost per unit for 25,000 units is calculated by dividing the total fixed manufacturing overhead by the number of units. Assuming fixed manufacturing overhead doesn't change with the number of units, the cost is (Fixed manufacturing overhead / 25,000 units).
6. For 33,500 units, the average fixed manufacturing cost per unit is likewise (Fixed manufacturing overhead / 33,500 units).
7. The total amount of fixed manufacturing overhead incurred remains constant and does not change with the level of production; it is just the Fixed manufacturing overhead.
8. Since fixed costs do not vary with output, the total amount of fixed manufacturing overhead for 33,500 units produced is the same as for any other number within the relevant range of production.

To find the average fixed manufacturing cost per unit produced for 25,000 and 33,500 units, we need to know the total fixed manufacturing overhead, which isn't provided in the question.

Answer 2

1. $21.50
2. $21.50
3. 25,000 x $21.50 = $537,500
4. 33,500 x $21.50 = $720,250
5. $453,375 / 25,000 = $18.135
6. $453,375 / 33,500 = $13.53
7. $453,375
8. $453,375

Step-by-step explanation:

29,250 units produced and sold

Direct materials $8.50

Direct labor $5.50

Variable manufacturing overhead $3.00

Fixed manufacturing overhead $6.50, total $190,125

Fixed selling expense $5.00, total $146,250

Fixed administrative expense $4.00, total $117,000

Sales commissions $2.50

Variable administrative expense $2.00

relevant range of production is 25,000 to 33,500 units

total variable cost per unit = $8.50 + $5.50 + $3 + $2.50 + $2 = $21.50

that means that if the company produces and sells between 25,000 to 33,500 units, their variable cost per unit will be the same.

total fixed costs will also be the same:

• Fixed manufacturing overhead $190,125
• Fixed selling expense $146,250
• Fixed administrative expense $117,000
• total $453,375