Question

Kubin Company’s relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows:

Average Cost per Unit
Direct materials	$	8.40
Direct labor	$	5.40
Variable manufacturing overhead	$	2.90
Fixed manufacturing overhead	$	6.40
Fixed selling expense	$	4.90
Fixed administrative expense	$	3.90
Sales commissions	$	2.40
Variable administrative expense	$	1.90

Required:

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

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 27,500 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 31,000 units?

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 24,000 units?

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

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) Total Amount of Product costs = $ 635,250

2) Total Amount of Period costs Incurred = $ 360,250

3) Total Amount of Product costs = $ 693,700

4 )Total Amount of Period costs = $ 345,200

Explanation:

Products costs :

products cost is the cost which are incurred in relation to products and included in Inventory valuation

In Other words, In financial accounting, All manufacturing expenses either variables or fixed are treated as products costs.

Period Costs :

Period Cost are the cost which are incurred on the basis of Time irrespective of number of units produced and

Charged to Income statement.

In Other words, In financial accounting, All Administration and selling expenses

whether variables or fixed are treated as Periods costs.

Required 1 :

Calculate the Total amount of Product costs Incurred to Make 27,500 Units :

Product cost per unit = Direct materials + Direct Labor + Variable manufacturing overhead + Fixed Manufacturing Overhead

Product cost per unit = $ 8.40 + $ 5.40 + $ 2.90 + $ 6.40

Product cost per unit = $ 23.10 Per Unit

Total Amount of Product costs = 27,500 Units * $ 23.10 Per Unit

Total Amount of Product costs = $ 635,250

Required 2 :

Calculate the Total amount of Periods costs Incurred to sell 27,500 Units :

Period Cost per Unit = Fixed selling expenses + Fixed administrative expenses + Sales Commission + Variable Administrative Expenses

Period Cost per Unit = $ 4.90 + $ 3.90 + $ 2.40 + $ 1.90

Period Cost per Unit = $ 13.10 Per Unit

Total Amount of Periods costs Incurred = 27,500 Units * $ 13.10 Per Unit

Total Amount of Period costs Incurred = $ 360,250

Required 3 :

Calculate the Total amount of Product costs Incurred to Make 31,000 Units :

Variable Product cost per unit = Direct materials + Direct Labor + Variable manufacturing overhead

Variable Product cost per unit = $ 8.40 + $ 5.40 + $ 2.90

Variable Product cost per unit = $ 16.70 Per Unit

Variable Product cost = $ 16.70 Per Unit * 31,000 Units = $ 517,700

Fixed Product Cost = $ 6.40 * 27,500 Units = $ 176,000

Total Amount of Product costs = Variable Product cost + Fixed Product cost

Total Amount of Product costs = $ 517,700 + $ 176,000

Total Amount of Product costs = $ 693,700

Note :

Fixed cost is always Constant. It doesn't change at any Level of Activity.

Required 4 :

Calculate the Total amount of Periods costs Incurred to sell 24,000 Units :

Variable Period Cost per Unit = Sales Commission + Variable Administrative Expenses

Variable Period Cost per Unit = $ 2.40 + $ 1.90

Variable Period Cost per Unit = $ 4.30 Per Unit

Variable Period cost = 24,000 Units * $ 4.30 Per Unit = $ 103,200

Fixed Period Cost per Unit = Fixed selling expenses + Fixed administrative expenses

Fixed Period Cost per Unit = $ 4.90 + $ 3.90

Fixed Period Cost per Unit = $ 8.80 Per Unit

Fixed Period cost = $ 8.80 per Unit * 27,500 Units

Fixed Period cost = $ 242,000

Total Amount of Periods costs = Variable Period Cost + Fixed Period Cost

Total Amount of Period costs = $ 103,200 + $ 242,000

Total Amount of Period costs = $ 345,200

Note :

Fixed cost is always Constant. It doesn't change at any Level of Activity.