Question

Wilson Sheridan is a leading producer of vinyl replacement windows. The company’s growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single manufacturing plant in Kansas City with an annual capacity of 500,000 windows. Current production is budgeted at 450,000 windows per year, a quantity that has been constant over the past three years. Based on the budget, the accounting department has calculated the following unit costs for the windows:

Direct materials		$55.00
Direct labor		18.00
Manufacturing overhead		16.00
Selling and administrative		14.00
Total unit cost		$103.00

The company’s budget includes $5,400,000 in fixed overhead and $3,150,000 in fixed selling and administrative expenses. The windows sell for $150.00 each. A 2% distributor’s commission is included in the selling and administrative expenses.

(a1)

Calculate variable overhead per unit and variable selling and administrative costs per unit. (Round answers to 2 decimal places, e.g. 15.25.)

Variable overhead per unit	$enter a dollar amount rounded to 2 decimal places
Variable selling and administrative costs per unit	$enter a dollar amount rounded to 2 decimal places

Answer 1

Variable overhead per unit =$4 per unit

Variable selling & administrative per unit = $7 per unit

Calculation of Variable overhead cost per unit

Total Manufacturing overhead = Budgeted quantity * mfg overhead per unit

Total manufacturing overhead = 450000 * 16 =$7200000

Total variable overhead = Total mfg overhead - Fixed overhead

Total variable overhead = 7200000 - 5400000 =$1800000

Variable overhead per unit = 1800000/450000 =$4 per unit

Calculation of variable selling and administrative per unit

Total selling and administrative cost

= Budgeted quantity * selling and administrative cost per unit

=450000 * 14 =$6300000

Variable selling and administrative cost

= Total cost - Fixed costs

=6300000 - 3150000 =$3150000

Variable selling cost per unit = 3150000/450000 =$7 per unit