Question

Lagle Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 5.30 Direct labor $ 4.00 Variable manufacturing overhead $ 1.45 Fixed manufacturing overhead $ 8,500 Sales commissions $ 1.90 Variable administrative expense $ 0.35 Fixed selling and administrative expense $ 7,200 For financial reporting purposes, the total amount of period costs incurred to sell 5,000 units is closest to:

Answer 1

Product cost is the cost directly attributable to product such as direct material, direct labour, direct and allocated manufacturing overheads. Period cost is the cost which is not product cost. Period cost can be easily attributable to accounting period rather than to allocated it to production process or finished goods. Examples of period costs are selling and administrative expenses, rent expense, advertising expense.

Total amount of period cost incurred to sell 5000 units is closet to:
	Absorbtion costing	Variable Costing
Fixed manufacturing overhead		$8,500
Sales commission (5000 x $1.90)	$9,500	$9,500
Variable administrative expenses	$1,750	$1,750
Fixed selling and administrative expenses	$7,200	$7,200
Total amount of period cost	$18,450	$26,950