Question

Kubin Company’s relevant range of production is 20,000 to 23,000 units. When it produces and sells 21,500 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	8.00
Direct labor	$	5.00
Variable manufacturing overhead	$	2.50
Fixed manufacturing overhead	$	6.00
Fixed selling expense	$	4.50
Fixed administrative expense	$	3.50
Sales commissions	$	2.00
Variable administrative expense	$	1.50

3. For financial accounting purposes, what is the total amount of product costs incurred to make 23,000 units?

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

Answer 1

Answer
3.Product cost -total amount of product costs incurred to make 23,000 units
15.5*23,000 + 6*21500
$356,500 +129,000
$485,500
Working Note -
		Cost per Unit
Direct materials	$	8
Direct labor	$	5
Variable manufacturing overhead	$	2.5
	$	15.5

4.Period cost = total amount of product costs incurred to make 20,000 units
3.5*23,000 + 8*21500
$805,00 + 172,000
= $252,500