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EXERCISE 1-7 Direct and Indirect Costs L01-1 Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 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 $7.00 $4.00 $1.50 $5.00 $3.50 $2.50 $1.00 $0.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 20,000 units? b. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 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 $50,000 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 20,000 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 20,000 units, what is the total indirect selling expense that can- not be readily traced to individual sales representatives? 4. Are Kubin's administrative expenses always going to be tested as indirect costs in its internal management reports? 1 EXERCISE 1-9 Fied, Variable, and Missed Costs 101-4 Refer to the data given in Exercise 1-7. Answer all questions independently. Required: IF 18,000 units are produced and sold, what is the variable cost per unit produced and sold? 2. IF 22,000 units are produced and sold, what is the variable cost per unit produced and sold? 3. If 18,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 4. IF 22.000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 5. IF 18.000 units are produced, what is the average fixed manufacturing cost per unit produced? 6. I 22,000 units are produced, what is the average fixed manufacturing cost per unit produced 7. IF 18.000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? 8. If 22,000 units are produced, what is the tal amoent of fixed manufacturing overhead incurred to support this level of producten? EXERCISE 1-10 Differential Costs and Sunkar Refer to the data given in Exercise 1-7. A wwal using independently Required: 1. What is the incremental manufacturing cost is curred if the company increases production from 20,000 to 20,001 units? 2. What is the incremental cost incurred if the company increases production and sales from 20,000 to 20,001 units? 3. Assume that Kubin Company produced 20,000 units and expects to sell 19.800 of them. If a new customer unexpectedly emerges and expresses interest in buying the 200 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer? 4. Assume that Kubin Company produced 20,000 units and expects to sell 19,800 of them. If a new customer unexpectedly emerges and expresses interest in buying the 200 extra units that have been produced by the company and that would otherwise remain unsold, what incremen tal selling and administrative cost per unit is incurred to sell these units to the customer? EXERCISE 1-7 Direct and Indirect Costs L01-1 Kubin Company's relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 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 $7.00 $4.00 $1.50 $5.00 $3.50 $2.50 $1.00 $0.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 20,000 units? b. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 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 $50,000 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 20,000 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 20,000 units, what is the total indirect selling expense that can- not be readily traced to individual sales representatives? 4. Are Kubin's administrative expenses always going to be tested as indirect costs in its internal management reports? 1 EXERCISE 1-9 Fied, Variable, and Missed Costs 101-4 Refer to the data given in Exercise 1-7. Answer all questions independently. Required: IF 18,000 units are produced and sold, what is the variable cost per unit produced and sold? 2. IF 22,000 units are produced and sold, what is the variable cost per unit produced and sold? 3. If 18,000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 4. IF 22.000 units are produced and sold, what is the total amount of variable cost related to the units produced and sold? 5. IF 18.000 units are produced, what is the average fixed manufacturing cost per unit produced? 6. I 22,000 units are produced, what is the average fixed manufacturing cost per unit produced 7. IF 18.000 units are produced, what is the total amount of fixed manufacturing overhead incurred to support this level of production? 8. If 22,000 units are produced, what is the tal amoent of fixed manufacturing overhead incurred to support this level of producten? EXERCISE 1-10 Differential Costs and Sunkar Refer to the data given in Exercise 1-7. A wwal using independently Required: 1. What is the incremental manufacturing cost is curred if the company increases production from 20,000 to 20,001 units? 2. What is the incremental cost incurred if the company increases production and sales from 20,000 to 20,001 units? 3. Assume that Kubin Company produced 20,000 units and expects to sell 19.800 of them. If a new customer unexpectedly emerges and expresses interest in buying the 200 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer? 4. Assume that Kubin Company produced 20,000 units and expects to sell 19,800 of them. If a new customer unexpectedly emerges and expresses interest in buying the 200 extra units that have been produced by the company and that would otherwise remain unsold, what incremen tal selling and administrative cost per unit is incurred to sell these units to the customer

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