Question

Exercise 1-8 Product Costs and Period Costs; Variable and Fixed Costs [LO1-3, LO1-4]

Kubin Company’s relevant range of production is 21,000 to 25,000 units. When it produces and sells 23,000 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.10
Direct labor	$	5.10
Variable manufacturing overhead	$	2.60
Fixed manufacturing overhead	$	6.10
Fixed selling expense	$	4.60
Fixed administrative expense	$	3.60
Sales commissions	$	2.10
Variable administrative expense	$	1.60

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 23,000 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 23,000 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 25,000 units?

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 21,000 units?

(For all requirements, do not round intermediate calculations.)

Answer 1

1.

	Average Cost per Unit
Direct materials	$	8.10
Direct labor	$	5.10
Variable manufacturing overhead	$	2.60
Fixed manufacturing overhead	$	6.10
Total product cost	$	21.90

For financial accounting purposes, the total amount of product costs incurred to make 23,000 units = 23,000 x 21.90

= $503,700

2.

	Average Cost per Unit
Fixed selling expense	$	4.60
Fixed administrative expense	$	3.60
Sales commissions	$	2.10
Variable administrative expense	$	1.60
Total period cost	$	11.90

For financial accounting purposes, the total amount of period costs incurred to sell 23,000 units = 23,000 x 11.90

= $273,700

3.

	Average Cost per Unit
Direct materials	$	8.10
Direct labor	$	5.10
Variable manufacturing overhead	$	2.60
Total	$	15.80

Total Fixed manufacturing overhead = 6.10 x 23,000

= $140,300

For financial accounting purposes, the total amount of product costs incurred to make 25,000 units = 25,000 x 15.80 + 140,300

= $535,300

4.

	Average Cost per Unit		Total cost
Fixed selling expense	$	4.60	4.60 x 23,000 = 105,800
Fixed administrative expense	$	3.60	3.60 x 23,000 = 82,800
Sales commissions	$	2.10	2.10 x 21,000 = 44,100
Variable administrative expense	$	1.60	1.60 x 21,000 = 33,600
Total period cost	$		$266,300

For financial accounting purposes, the total amount of period costs incurred to sell 21,000 units = $266,300