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The costs per unit and period for Milligan Exploration for all relevant ranges of activity is...

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Accounting

The costs per unit and period for Milligan Exploration for allrelevant ranges of activity is as follows:

                                                                       Cost perUnit            Cost per Period

           Selling price perunit                                     14.25

           Directmaterials                                              5.00

           Directlabor                                                    2.90

           Variable manufacturingoverhead                 1.25

           Fixed manufacturingoverhead                      -                      $21,000

           Salescommissions                                         1.00

           Variable administrativeexpense                    0.55

           Fixed selling and administrativeexp.                                    $7,500

1. If Milligan produces 4,200 units, what is the total amount ofdirect manufacturing cost incurred?

2. If 5,000 units are produced by Milligan, what is the totalamount of indirect manufacturing overhead cost incurred?

3. What is Milligan’s contribution margin per unit sold?

Answer & Explanation Solved by verified expert
3.6 Ratings (341 Votes)

1 Calculate total amount of direct manufacturing cost
Number of units cost per period Amount
Direct materials 4200 5 21000
Direct labor 4200 2.9 12180
variable manufacturing overhead 4200 1.25 5250
Fixed manufacturing overhead 21000
Total amount of direct manufacturing cost 59430
2 Indirect manufacturing overhead cost (given) 21000
Indirect manufacturing overhead cost includes depreciation, repairs and maintenance,electricity, supervisor salaries , quality cost and other factory cost associated with manufacturing and it is period cost , will not change according to change in the production, even if 5000 units are produced, manufacturing cost remains same.
3 Calculate contribution margin per unit sold for milliganExploration
cost per unit
Sales 14.25
Direct materials -5
Direct labor -2.9
variable manufacturing overhead -1.25
5.1
less: variable selling and administrative expenses
sales commission -1
varaible admin expenses -0.55
Contribution margin 3.55

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