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?

Complete thisquestion by entering your answers in the tabs below.

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? (Round per unit values to 2 decimal places.)

b. How much totalmanufacturing cost is an indirect cost that cannot be easily tracedto the Manufacturing Department?

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2a. Directmaterials per unit $8.20 Direct laborper unit 5.20 Variablemanufacturing overhead per unit 2.70 Fixedmanufacturing overhead per unit 6.20 Totalmanufacturing cost per unit $22.30 Number ofunits sold 24,500 Total directcosts $546,350 2b. Total indirect costs 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? Complete thisquestion by entering your answers in the tabs below. Required 1 Required 2 Required 3 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? (Roundper unit value to 2 decimal places.) b. When the companysells 24,500 units, what is the total indirect selling expense thatcannot be readily traced to individual sales representatives? Required 3