Question

Kubin Company’s relevant range of production is 13,000 to 18,000 units. When it produces and sells 15,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 7.40 Direct labor $ 4.40 Variable manufacturing overhead $ 1.90 Fixed manufacturing overhead $ 5.40 Fixed selling expense $ 3.90 Fixed administrative expense $ 2.90 Sales commissions $ 1.40 Variable administrative expense $ 0.90 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 15,500 units? 2. For financial accounting purposes, what is the total amount of period costs incurred to sell 15,500 units? 3. For financial accounting purposes, what is the total amount of product costs incurred to make 18,000 units? 4. For financial accounting purposes, what is the total amount of period costs incurred to sell 13,000 units?

Answer 1

Answer:

1. $296,050

2. $141,050

3. $330,300

4. $135,300

Explanation:

Given that,

When company produces and sells 15,500 units;

Direct materials = $ 7.40

Direct labor = $ 4.40

Variable manufacturing overhead = $ 1.90

Fixed manufacturing overhead = $ 5.40

Fixed selling expense = $ 3.90

Fixed administrative expense = $ 2.90

Sales commissions = $ 1.40

Variable administrative expense = $ 0.90

1. Total amount of product costs:

= Number of units × (Direct Material Per Unit + Direct Labor Per Unit + Variable Manufacturing Overhead + Fixed Manufacturing Overhead Per Unit)

= 15,500 × ($ 7.40 + $ 4.40 + $ 1.90 + $5.40)

= 15,500 × $19.10

= $296,050

2. Total Amount of Period Costs:

= Number of Units × (Fixed Selling Expense Per Unit + Fixed Administrative Expense Per Unit + Sales Commissions Per Unit + Variable Administrative Expense Per Unit)

= 15,500 × ($ 3.90 + $ 2.90 + $1.40 + $0.90)

= $141,050

3. Total amount of product costs at 18,000 units:

= Direct Material + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead

= (18,000 × 7.40) + (18,000 × 4.40) + (18,000 × 1.90) + (15,500 × 5.40)

= $133,200 + $79,200 + $34,200 + $83,700

= $330,300

4. Total amount of period costs at 13,000 units:

= Fixed Selling Expense + Fixed Administrative Expense + Sales Commissions + Variable Administrative Expense

= (15,500 × $3.90) + (15,500 × $2.90) + (13,000 × $1.40) + (13,000 × $0.90)

= $60,450 + $44,950 + $18,200 + $11,700

= $135,300