Question

Kubin Company's relevant range of production is 11,000 to 14,000 units. When it produces and sells 12,500 units, its average costs per unit are as follows Average Cost per Unit 7.20 $ 4.20 $ 1.70 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales comm15s1ons Variable administrative expense 5.20 $ 3.70 2.70 1.20 $ 0.70 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 12,500 units? 2. For financial accounting purposes, what is the total amount of period costs incurred to sell 12,500 units? 3. For financial accounting purposes, what is the total amount of product costs incurred to make 14,000 units? 4. For financial accounting purposes, what is the total amount of period costs incurred to sell 11,000 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) The product costs incurred to make 12,500 units are:

Direct material cost = $7.2

Direct Labor cost = $ 4.2

Variable Manufacturing overheads = $ 1.7

Fixed Manufacturing overheads =$ 5.2

Total Product Costs per unit $18.3

TOTAL product costs incurred to make 12,500 units are =$18.3* 12500

=$228,750

2) Total period costs incurred to sell 12,500 units

Fixed Selling Expenses = $3.7

Fixed administrative expenses = $2.7

Sales Commissions =$1.2

Variable administrative expenses =$0.7

Total period costs per unit $8.3

Total period costs incurred to sell $12,500 units = $8.3 *12,500 units

$103,750

3 )Total product costs incurred to make 14000 units:

Direct Material Costs =$7.2

Direct Labor Costs = $4.2

Variable Manufacturing Overheads = $1.7

Total Variable costs per unit =$13.1

Total variable Costs for 14000 units =$13.1 * 14000 units = $183,400

Total Fixed Manufacturing overheads per unit for 12,500 units = $5.2*12500 units

Fixed Manufacturing overheads for 12,500 units =$65,000

Remember: Fixed costs never change with the number of units produced or sold ,therefore Fixed Manufacturing overheads will be $65000 irrespective of whether 12,500 or 14000 units are produced.

Total Product costs = Variable costs + Fixed manufacturing overhead

= $ 183,400 + $65,000

=$248,400

4)Total period costs incurred to sell 11,000 units:

Fixed selling expense =$3.7 * 12,500

= $46,250( Fixed expense remains constant irrespective of units produced/ sold)

Fixed administrative expense =$2.7 * 12,500

= $33,750( Fixed expense remains constant irrespective of units produced/ sold)

Sales commissions (variable expense) =$1.2* 11000

=$13,200

Variable administrative expense= $ 0.7*11000

=$7,700

Total period costs incurred to sell 11,000 units:

$46,250+ $33,750+$13,200+$7,700= $100,900