Question

Kubin Company’s relevant range of production is 23,000 to 27,500 units. When it produces and sells 25,250 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.30
Direct labor	$	5.30
Variable manufacturing overhead	$	2.80
Fixed manufacturing overhead	$	6.30
Fixed selling expense	$	4.80
Fixed administrative expense	$	3.80
Sales commissions	$	2.30
Variable administrative expense	$	1.80

Required:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 25,250 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 25,250 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 27,500 units?

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

Answer 1

For financial accounting purposes :

1) calculation of the total amount of product costs incurred to make 25,250 units :-

particular	calculations	amounts
direct materials	25250 units x $8.30	$209575
direct labor	25250 units x $5.30	$133825
Variable manufacturing overhead	25250 units x $2.80	$70700
Fixed manufacturing overhead	25250 units x $6.30	$159075
total product costs		$573175

2) calculation of the total amount of period costs incurred to sell 25,250 units :-

particular	calculations	amounts
Fixed selling expense	25250 units x $4.80	$121200
Fixed administrative expense	25250 units x $3.80	$95950
Sales commissions	25250 units x $2.30	$58075
Variable administrative expense	25250 units x $1.80	$45450
total period costs		$320675

3) calculation of total amount of product costs incurred to make 27,500 units :-

particular	calculations	amounts
direct materials	27500 units x $8.30	$228250
direct labor	27500 units x $5.30	$145750
Variable manufacturing overhead	27500 units x $2.80	$77000
Fixed manufacturing overhead	25250 units x $6.30 (fixed)	$159075
total product costs		$610075

4) calculation of total amount of period costs incurred to sell 23,000 units :-

particular	calculations	amounts
Fixed selling expense	25250 units x $4.80 (fixed)	$121200
Fixed administrative expense	25250 units x $3.80 (fixed)	$95950
Sales commissions	23000 units x $2.30	$52900
Variable administrative expense	23000 units x $1.80	$41400
total period costs		$311450

note : fixed overhead per unit is given for 25250 units. wherever fixed overhead per unit, used it will taken for 25250 units produced and sold.

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