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: Average Cost per UnitDirect materials . . . . . . . . . . . . . . . . . . . . . . . . . $7.00Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.00Variable manufacturing overhead . . . . . . . . . $1.50Fixed manufacturing overhead . . . . . . . . . . . $5.00Fixed selling expense . . . . . . . . . . . . . . . . . . . $3.50Fixed administrative expense . . . . . . . . . . . . . $2.50Sales commissions . . . . . . . . . . . . . . . . . . . . . . $1.00Variable administrative expense . . . . . . . . . . $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’ssales 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 cannot be readily traced to individual sales representatives?4. Are Kubin’s administrative expenses always going to be treated as indirect costs in its internal management reports?
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 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows:
Average Cost
per Unit
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . $7.00
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.00
Variable manufacturing overhead . . . . . . . . . $1.50
Fixed manufacturing overhead . . . . . . . . . . . $5.00
Fixed selling expense . . . . . . . . . . . . . . . . . . . $3.50
Fixed administrative expense . . . . . . . . . . . . . $2.50
Sales commissions . . . . . . . . . . . . . . . . . . . . . . $1.00
Variable administrative expense . . . . . . . . . . $0.50
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 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 cannot be readily traced to individual sales representatives?
4. Are Kubin’s administrative expenses always going to be treated as indirect costs in its internal management reports?
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