Question

Kubin Company’s relevant range of production is 22,000 to 27,000 units. When it produces and sells 24,500 units, its average costs per unit are as follows: Average Cost per Unit: Direct materials$8.20 Direct labor$5.20 Variable manufacturing overhead$2.70 Fixed manufacturing overhead$6.20 Fixed selling expense$4.70 Fixed administrative expense$3.70 Sales commissions$2.20 Variable administrative expense$1.70

1. For financial accounting purposes, what is the total amount of product costs incurred to make 24,500 units?
2. For financial accounting purposes, what is the total amount of period costs incurred to sell 24,500 units?
3. For financial accounting purposes, what is the total amount of product costs incurred to make 27,000 units?
4. For financial accounting purposes, what is the total amount of period costs incurred to sell 22,000 units?

Answer 1

For financial accounting purposes, the total amount of product costs incurred to make 24,500 units is $545,900. The total amount of period costs incurred to sell 24,500 units is $301,550. The total amount of product costs incurred to make 27,000 units is $602,100. The total amount of period costs incurred to sell 22,000 units is $270,600.

Step-by-step explanation:

1. For financial accounting purposes, the total amount of product costs incurred to make 24,500 units can be calculated by adding up the relevant costs per unit and multiplying it by the number of units produced. In this case, the total product costs would be:

Direct materials: $8.20 x 24,500 units = $200,450

Direct labor: $5.20 x 24,500 units = $127,400

Variable manufacturing overhead: $2.70 x 24,500 units = $66,150

Fixed manufacturing overhead: $6.20 x 24,500 units = $151,900

The total product costs would be $200,450 + $127,400 + $66,150 + $151,900 = $545,900.

2. For financial accounting purposes, the total amount of period costs incurred to sell 24,500 units would include the fixed selling expense, fixed administrative expense, sales commissions, and variable administrative expense. The total period costs would be:

Fixed selling expense: $4.70 x 24,500 units = $115,150

Fixed administrative expense: $3.70 x 24,500 units = $90,850

Sales commissions: $2.20 x 24,500 units = $53,900

Variable administrative expense: $1.70 x 24,500 units = $41,650

The total period costs would be $115,150 + $90,850 + $53,900 + $41,650 = $301,550.

3. For financial accounting purposes, the total amount of product costs incurred to make 27,000 units can be calculated in the same way as in question 1, using the costs per unit and the number of units produced. The total product costs would be:

Direct materials: $8.20 x 27,000 units = $221,400

Direct labor: $5.20 x 27,000 units = $140,400

Variable manufacturing overhead: $2.70 x 27,000 units = $72,900

Fixed manufacturing overhead: $6.20 x 27,000 units = $167,400

The total product costs would be $221,400 + $140,400 + $72,900 + $167,400 = $602,100.

4. For financial accounting purposes, the total amount of period costs incurred to sell 22,000 units would include the fixed selling expense, fixed administrative expense, sales commissions, and variable administrative expense. The total period costs would be:

Fixed selling expense: $4.70 x 22,000 units = $103,400

Fixed administrative expense: $3.70 x 22,000 units = $81,400

Sales commissions: $2.20 x 22,000 units = $48,400

Variable administrative expense: $1.70 x 22,000 units = $37,400

The total period costs would be $103,400 + $81,400 + $48,400 + $37,400 = $270,600.