Question

Kubin Company’s relevant range of production is 25,000 to 33,500 units. When it produces and sells 29,250 units, its average costs per unit are as follows:

1. For financial accounting purposes, what is the total amount of product costs incurred to make 29,250 units?

2. For financial accounting purposes, what is the total amount of period costs incurred to sell 29,250 units?

3. For financial accounting purposes, what is the total amount of product costs incurred to make 33,500 units?

4. For financial accounting purposes, what is the total amount of period costs incurred to sell 25,000 units?

Answer 1

1)  For financial accounting purposes, what is the total amount of product costs incurred to make 29,250 units?

Direct material (8.50 * 29,250)        248,625

Direct labor (5.50 * 29,250)             160,875

Variable manufacturing overhead

(3.00 * 29,250)                                  87,750

Fixed manufacturing overhead

(6.5 * 29,250)                                    190,125

Total product cost                           687,375

2) For financial accounting purposes, what is the total amount of period costs incurred to sell 29,250 units?

Fixed cost (5+4) * 29,250                263,250

Variable cost

(2.5+2) * 29,250 * 29,250               131,625            

Total period cost                             394,875

3) For financial accounting purposes, what is the total amount of product costs incurred to make 33,500 units?

Direct material (8.50 * 33,500)       284,750

Direct labor (5.50 * 33,500)            184,250

Variable manufacturing overhead

(3 * 33,500)                                      100,500

Fixed manufacturing overhead

(6.5 * 33,500)                                   217,750

Total product cost                           787,250

4) For financial accounting purposes, what is the total amount of period costs incurred to sell 25,000 units?

Fixed cost (5+4)  * 25,000             225,000

Variable cost (2.5+2) * 25,000      112,500

Total period cost                            135,000

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