Question

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. For financial accounting purposes, what is the total amount of product costs incurred to make 20,000 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 20,000 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 22,000 units?

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 18,000 units?

1.Total amount of product costs =

2.Total amount of period costs incurred =

3.Total amount of product costs =

4.Total amount of period costs =

Answer 1

1. Solution: $350,000

Working: Variable manufacturing cost per unit = Direct material + Direct labor + Variable manufacturing overhead = 7 + 4+ 1.5 = 12.50

12.50 X (Number of units) = 12.50 * 20,000 = 250,000

Average fixed manufacturing overhead per unit * Number of units produced

$5 * 20,000 = 100,000

250,000 + 100,000 = 350,000

　

2. Solution: $150,000

Working: Variable selling and admin. per unit X (Number of units) = 1.50 * 20,000 = 30,000

Average fixed selling and administrative expense per unit = $6 * 20,000 = 120,000

120,000 + 30,000 = 150,000

　

3. Solution: $375,000

Working:

Variable manufacturing cost per unit = Direct material + Diresct labor + Variable manufacturing overhead = 7 + 4+ 1.5 = 12.50

12.50 X (Number of units) = 12.50 * 22,000 = 275,000

Fixed Overhead = $5 * 20,000 = 100,000

275,000 + 100,000 = 375,000

　

4. Solution: $135,000

Working: VOH * Number of Units = 1.5 * 18,000 = 27,000

Average fixed selling and administrative expense per unit = $6 * 18,000 = 108,000

27000 + 108000 = 135000