Exercise 1-7 Direct and Indirect Costs

ssignment Print View Score: Score: 98.17/100 Points 1. 98.17 % You received credit for this question in a previous attempt Exercise Exercise 1-7 1-7 Direct Direct and and Indirect Indirect Costs Costs [LO1-1] [LO1-1] Kubin Company’s relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit $ 8.40 $ 5.40 $ 2.90 $ 6.40 $ 4.90 $ 3.90 $ 2.40 $ 1.90 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 27,500 units? b. What is the total indirect manufacturing cost incurred to make 27,500 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 27,500 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 $107,250 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 27,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 27,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives? Page 1 of 4 ssignment Print View Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 27,500 units? (Round per unit values to 2 decimal places.) b. What is the total indirect manufacturing cost incurred to make 27,500 units? (Round per unit values to 2 decimal places.) 1a. $ Direct materials per unit Direct manufacturing cost per unit # $ 13.80 $ 379,500 27,500 Number of units sold Total direct manufacturing cost 1b. 8.40 5.40 Direct labor per unit $ Variable manufacturing overhead per unit 2.90 Indirect manufacturing cost per unit $ 9.30 $ 255,750 27,500 Number of units sold Total indirect manufacturing cost ! !Required 1 # # 6.40 Fixed manufacturing overhead per unit # # # Required 2 " " References Worksheet Exercise 1-7 Direct and Indirect Costs [LO1-1] Difficulty: 1 Easy Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs. Exercise Exercise 1-7 1-7 Direct Direct and and Indirect Indirect Costs Costs [LO1-1] [LO1-1] Kubin Company’s relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost per Unit $ 8.40 $ 5.40 $ 2.90 $ 6.40 $ 4.90 $ 3.90 $ 2.40 $ 1.90 Page 2 of 4 ssignment Print View Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 27,500 units? b. What is the total indirect manufacturing cost incurred to make 27,500 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 27,500 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 $107,250 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 27,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 27,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 27,500 units? (Round per unit values to 2 decimal places.) b. What is the total indirect manufacturing cost incurred to make 27,500 units? (Round per unit values to 2 decimal places.) 1a. Direct materials per unit $ 8.40 Direct labor per unit 5.40 Direct manufacturing cost per unit F $ Number of units sold 13.80 27,500 Total direct manufacturing cost F 1b. Variable manufacturing overhead per unit $ 379,500 $ 2.90 Fixed manufacturing overhead per unit 6.40 Indirect manufacturing cost per unit F $ Number of units sold 9.30 27,500 Total indirect manufacturing cost F $ 255,750 ! !Required 1 Required 2 " " Explanation: 1b. Note: The average fixed manufacturing overhead cost per unit of $6.40 is valid for only one level of activity—27,500 units produced. 2b. None of the manufacturing costs should be treated as indirect costs when the cost object is the Manufacturing Department. 3a. The first step in calculating the total direct selling expense is to determine the fixed portion of the sales representatives’ compensation as follows: Fixed selling expense per unit (a) Number of units sold (b) Total fixed selling expense (a) × (b) Total fixed selling expense (a) Advertising expenditures (b) Total fixed portion of the sales representatives’ compensation (a) ‒ $ 4.90 27,500 $ 134,750 $ 134,750 $ 107,250 Page 3 of 4 ssignment Print View (b) $ 27,500 3b. The total indirect selling expense that cannot be traced to individual sales representatives is $107,250. The advertising expenditures cannot be traced to specific sales representatives. tps://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&si…4571&wid=13252714181665759&role=student&sid=13252714311297923 Page 4 of 4