Kubin Company’s relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 8.00 Direct labor $ 5.00 Variable manufacturing overhead $ 2.50 Fixed manufacturing overhead $ 6.00 Fixed selling expense $ 4.50 Fixed administrative expense $ 3.50 Sales commissions $ 2.00 Variable administrative expense $ 1.50 Exercise 1-7 (Algo) Direct and Indirect Costs [LO1-1] Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 21,500 units? b. What is the total indirect manufacturing cost incurred to make 21,500 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 21,500 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 $75,250 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 21,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 21,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Kubin Company’s relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows:
| Average Cost per Unit | |
|---|---|
| Direct materials | $ 8.00 |
| Direct labor | $ 5.00 |
| Variable manufacturing |
$ 2.50 |
| Fixed manufacturing overhead | $ 6.00 |
| Fixed selling expense | $ 4.50 |
| Fixed administrative expense | $ 3.50 |
| Sales commissions | $ 2.00 |
| Variable administrative expense | $ 1.50 |
Exercise 1-7 (Algo) Direct and Indirect Costs [LO1-1]
Required:
1. Assume the cost object is units of production:
a. What is the total direct
b. What is the total indirect manufacturing cost incurred to make 21,500 units?
2. Assume the cost object is the Manufacturing Department and that its total output is 21,500 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 $75,250 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 21,500 units, what is the total direct selling expense that can be readily traced to individual sales representatives?
b. When the company sells 21,500 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives?
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