Question

 

Refer to the data given in Exercise 1-7. Answer all questions independently.

 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:

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?

Answer 1

1. Direct materials........................................... $ 7.00

Direct labor................................................. 4.00

Variable manufacturing overhead ................. 1.50

Variable manufacturing cost per unit ............ $12.50

Variable manufacturing cost per unit (a)	$12.50
Number of units produced (b)	20,000
Total variable manufacturing cost (a) × (b)		$250,000
Average fixed manufacturing overhead per unit (c)	$5.00
Number of units produced (d)	20,000
Total fixed manufacturing cost (c) × (d)		100,000
Total product cost		$350,000

Note: The average fixed manufacturing overhead cost per unit of $5.00 is valid for only one level of activity—20,000 units produced.

2. Sales commissions ...................................... $1.00

Variable administrative expense ................... 0.50

Variable selling and administrative per unit ... $1.50

 

Variable selling and admin. per unit (a)	$1.50
Number of units sold (b)	20,000
Total variable selling and admin. expense (a) × (b)		$30,000
Average fixed selling and administrative expense per unit ($3.50 fixed selling + $2.50 fixed administrative) (c)	$6.00
Number of units sold (d)	20,000
Total fixed selling and administrative expense (c) × (d)		120,000
Total period cost		$150,000

(Note: The average fixed selling and administrative expense per unit of $6.00 is valid for only one level of activity—20,000 units sold.)

3. Direct materials........................................... $ 7.00

Direct labor................................................. 4.00

Variable manufacturing overhead ................. 1.50

Variable manufacturing cost per unit ............ $12.50

 

Variable manufacturing cost per unit (a)....... $12.50

Number of units produced (b)...................... 22,000

Total variable manufacturing cost (a) × (b)... $275,000

Total fixed manufacturing cost (see requirement 1).......................... 100,000

Total product cost ....................................... $375,000 

4. Sales commissions ...................................... $1.00

Variable administrative expense ................... 0.50

Variable selling and administrative per unit ... $1.50

 

Variable selling and admin. per unit (a) ........ $1.50

Number of units sold (b).............................. 18,000

Total variable selling and admin. expense (a) × (b) ............................................... $27,000

Total fixed selling and administrative expense (see requirement 2)..................... 120,000

Total period cost ......................................... $147,000 

1. Total product cost ....................................... $350,000

2. Total product cost........................................ $150,000

(Note: The average fixed manufacturing overhead cost per unit of $5.00 is valid for only one level of activity—20,000 units produced.)

3. Total product cost ....................................... $375,000 

4. Total period cost ......................................... $147,000