Incremental manufracturing cost Saxbury Corporation\'s relevant range of activit
ID: 2620274 • Letter: I
Question
Incremental manufracturing cost
Saxbury Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 4,000 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 6.80 3.50 1.60 4.00 $0.75 0.60 0.50 0.50 Requirec a. If 5,000 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to 2 decimal places.) b. If 5,000 units are sold, what is the total amount of variable costs related to the units sold? c. If 5,000 units are produced, what is the average fixed manufacturing cost per unit produced? (Round "Per unit" answer to 2 decimal places.) d. If 5,000 units are produced, what is the total amount of fixed manufacturing cost incurred? e. If 5,000 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis? (Round "Per unit" answer to 2 decimal places.) f. What incremental manufacturing cost will the company incur if it increases production from 4,000 to 4,001 units? (Round "Per unit" answer to 2 decimal places.) a. Variable cost per unit sold b. Total variable costs c. Average fixed manufacturing cost d. Total fixed manufacturing overhead cost e. Total manufacturing overhead cost Manufacturing overhead per unitExplanation / Answer
a) If 5000 units are sold, variable cost per unit sold = Cost of (direct material + direct labor + variable manufacturing overhead + sales commissions + variable administrative cost ) = 6.8 + 3.5 + 1.6 + 0.5 + 0.5 = $ 12.90
Thus variable cost per unit sold = $ 12.90
b) Total variable cost related to units sold = No. of units sold * Variable cost per unit
Total variable cost related to units sold = 5000 * 12.90 = $ 64,500
c) Here we are calculating manufacturing cost of units produced. It should be noted that selling and administrative charges are not part of manufacturing costs. They are costs incurred to sell the product and not incurred to produce it.
Average fixed manufacturing cost per unit produced = fixed manufacturing overhead = $ 4 per unit produced
d) Total amount of fixed manufacturing cost incurred = No. of units produced * Fixed manufacturing cost per unit
Total amount of fixed manufacturing cost incurred = 5,000 * 4 = $ 20,000
e) Total amount of manufacturing overhead cost incurred = (Variable manufacturing overhead + Fixed manufacturing overhead) * No. of units produced
Total amount of manufacturing overhead cost incurred = (1.60 + 4) * 5000 = $ 28,000
f) Incremental manufacturing cost (from 4000 level to 4001 level) = Direct material + direct labor + variable manufacturing overhead + fixed manufacturing overhead = 6.8 + 3.5 + 1.6 + 4 = $ 15.9