Answer:
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:
1. If 25,000 units are produced and sold by Kubin Company, the variable cost per unit produced and sold is $21.50.
2. If 33,500 units are produced and sold by Kubin Company, the variable cost per unit produced and sold is $21.50.
3. If 25,000 units are produced and sold by Kubin Company, the total amount of variable cost related to the units produced and sold is $537,500 (25,000 x $21.50).
4. If 33,500 units are produced and sold by Kubin Company, the total amount of variable cost related to the units produced and sold is $720,2500 (33,500 x $21.50).
5. If 25,000 units are produced by Kubin Company, the average fixed manufacturing cost per unit produced is $18.14 ($453,375/25,000).
6. If 33,500 units are produced by Kubin Company, the average fixed manufacturing cost per unit produced is $13.53 ($453,375/33,500).
7. If 25,000 units are produced by Kubin Company, the total amount of fixed manufacturing overhead incurred to support this level of production is $453,375.
8. If 33,500 units are produced by Kubin Company, the total amount of fixed manufacturing overhead incurred to support this level of production remains $453,375.
Relevant production range = 25,000 to 33,500 units
Current production and sales units =29,250 units
Average costs per unit based on 29,250 units:
Direct materials $ 8.50
Direct labor $ 5.50
Variable manufacturing overhead $ 3.00
Total variable manufacturing cost per unit = $17
Fixed manufacturing overhead = $ 6.50
Total manufacturing cost per unit = $23.50 ($17 + $6.50)
Fixed selling expense $ 5.00
Fixed administrative expense $ 4.00
Sales commissions $ 2.50
Variable administrative expense $ 2.00
Total variable manufacturing cost per unit = $17
Sales commissions $ 2.50
Variable administrative expense $ 2.00
Total variable costs per unit = $21.50
Fixed manufacturing overhead $ 6.50
Fixed selling expense $ 5.00
Fixed administrative expense $ 4.00
Total fixed costs per unit $15.50
Total fixed costs based on 29,250 units = $453,375 ($15.50 x 29,250)
Thus, the variable cost per unit remains the same no matter the units produced and sold, while the total variable costs varies. On the other hand, the unit fixed cost varies while the total fixed costs are constant within the relevant range.
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