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 29,000 to 33,000 units. When it produces and sells 31,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed achinistrative expense Sales connissions Variable admanistrative expense Average Cost per Unit $ 8.90 $ 5.90 $ 3.40 $ 6.90 $ 5.40 $ 4.40 $ 2.90 $ 2.40 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 31,000 units? 2. For financial accounting purposes, what is the total amount of period costs incurred to sell 31,000 units? 3. For financial accounting purposes, what is the total amount of product costs incurred to make 33,000 units? 4. For financial accounting purposes, what is the total amount of period costs incurred to sell 29,000 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

Solution:

1. Calculation of Product Costs to make 31,000 units

       Direct Material (31,000 units * $8.90)                                            = $275,900

     Direct Labor (31,000 units * $5.90)                                 = $182,900

     Variable Manufacturing OH (31,000 units * $3.40)                          = $105,400

     Fixed Manufacturing OH (31,000 units * $6.90)                            =$213,900

     Total amount of product cost to make 31,000 units                 =$778,100

2. Calculation of Period Costs to sell 31,000 units

      Fixed Selling Expense (31,000 units * $5.40)                              = $167,400

Fixed Administrative Expense (31,000 units * $4.40)                    = $136,400

Sales Commission (31,000 units * $2.90)                                   = $ 89,900

Variable Administrative Exp.(31,000 units * $2.40)                   = $ 74,400

      Total amount of period cost to sell 31,000 units                      = $468,100

3. Calculation of Product Costs to make 33,000 units

      Direct Material (33,000 units * $8.90)                                           = $293,700

      Direct Labor (33,000 units * $5.90)                                               = $194,700

      Variable Manufacturing OH (33,000 units * $3.40)                    = $112,200

      Fixed Manufacturing OH                                                              = $213,900

      Total amount of product cost to make 33,000 units = $814,500

4. Calculation of Period Costs to sell 29,000 units

     Fixed Selling Expense                                                                  = $167,400

     Fixed Administrative Expense                                                        = $136,400

     Sales Commission (29,000 units * $2.90)                                        = $ 84,100

     Variable Administrative Exp.(29,000 units * $2.40)                    = $ 69,600

     Total amount of period cost to sell 31,000 units                       = $457,500