Exercise 1-7 Direct and Indirect Costs [LO1-1] Kubin Company’s relevant range of production is 22,000 to 27,000...

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Exercise 1-7 Direct and Indirect Costs [LO1-1]
Kubin Company’srelevant range of production is 22,000 to 27,000 units. When itproduces and sells 24,500 units, its average costs per unit are asfollows:

Average Cost per Unit
Directmaterials $ 8.20
Directlabor $ 5.20
Variablemanufacturing overhead $ 2.70
Fixedmanufacturing overhead $ 6.20
Fixed sellingexpense $ 4.70
Fixedadministrative expense $ 3.70
Salescommissions $ 2.20
Variableadministrative expense $ 1.70
Required:
1. Assume the costobject is units of production:
a. What is the totaldirect manufacturing cost incurred to make 24,500 units?
b. What is the totalindirect manufacturing cost incurred to make 24,500 units?
2. Assume the costobject is the Manufacturing Department and that its total output is24,500 units.
a. How much totalmanufacturing cost is directly traceable to the ManufacturingDepartment?
b. How much totalmanufacturing cost is an indirect cost that cannot be easily tracedto the Manufacturing Department?
3. Assume the costobject is the company’s various sales representatives. Furthermore,assume that the company spent $90,650 of its total fixed sellingexpense on advertising and the remainder of the total fixed sellingexpense comprised the fixed portion of the company's salesrepresentatives’ compensation.
a. When the companysells 24,500 units, what is the total direct selling expense thatcan be readily traced to individual sales representatives?
b. When the companysells 24,500 units, what is the total indirect selling expense thatcannot be readily traced to individual sales representatives?
what isthe fixed portion of sales representatives'compensation??

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Solution 1:

Particulars		Amount
1a.	Direct materials per unit	$8.20
	Direct labor per unit	$5.20
	Direct manufacturing cost per unit	$13.40
	Number of units sold	24500
	Total direct manufacturing cost	$328,300.00

1b.	Variable manufacturing overhead per unit	$2.70
	Fixed manufacturing overhead per unit	$6.20
	Indirect manufacturing cost per unit	$8.90
	Number of units sold	24500
	Total indirect manufacturing cost	$218,050.00

Solution 2:

Particulars		Amount
2a.	Direct materials per unit	$8.20
	Direct labor per unit	$5.20
	Variable manufacturing overhead per unit	$2.70
	Fixed manufacturing overhead per unit	$6.20
	Total manufacturing cost per unit	$22.30
	Number of units sold	24500
	Total Manufacturing cost traceble to manufacturing department	$546,350.00

2b.	Total indirect costs	$0.00

Solution 3:

Particulars		Amount
3a.	Sales commissions per unit	$2.20
	Number of units sold	24500
	Total sales commission	$53,900.00
	Fixed portion of sales representatives’ compensation (24500*$4.70 - $90,650)	$24,500.00
	Total direct selling expense	$78,400.00

3b.	The total indirect selling expense	$90,650.00

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Exercise 1-7 Direct and Indirect Costs [LO1-1]Kubin Company’srelevant range of production is 22,000 to 27,000 units. When itproduces and sells 24,500 units, its average costs per unit are asfollows: Average Cost per UnitDirectmaterials$8.20Directlabor$5.20Variablemanufacturing overhead$2.70Fixedmanufacturing overhead$6.20Fixed sellingexpense$4.70Fixedadministrative expense$3.70Salescommissions$2.20Variableadministrative expense$1.70Required:1. Assume the costobject is units of production:a. What is the totaldirect manufacturing cost incurred to make 24,500 units?b. What is the totalindirect manufacturing cost incurred to make 24,500 units?2. Assume the costobject is the Manufacturing Department and that its total output is24,500 units.a. How much totalmanufacturing cost is directly traceable to the ManufacturingDepartment?b. How much totalmanufacturing cost is an indirect cost that cannot be easily tracedto the Manufacturing Department?3. Assume the costobject is the company’s various sales representatives. Furthermore,assume that the company spent $90,650 of its total fixed sellingexpense on advertising and the remainder of the total fixed sellingexpense comprised the fixed portion of the company's salesrepresentatives’ compensation.a. When the companysells 24,500 units, what is the total direct selling expense thatcan be readily traced to individual sales representatives?b. When the companysells 24,500 units, what is the total indirect selling expense thatcannot be readily traced to individual sales representatives?what isthe fixed portion of sales representatives'compensation??

	Average Cost per Unit
Directmaterials	$	8.20
Directlabor	$	5.20
Variablemanufacturing overhead	$	2.70
Fixedmanufacturing overhead	$	6.20
Fixed sellingexpense	$	4.70
Fixedadministrative expense	$	3.70
Salescommissions	$	2.20
Variableadministrative expense	$	1.70