Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Selling price -------------------------------------- $135

Units in beginning inventory ----------------- 0

Units produced ---------------------------------- 5,000

Units sold ----------------------------------------- 4,900

Units in ending inventory ---------------------    100

Variable costs per unit:

   Direct materials ------------------------------- $33

   Direct labor ------------------------------------  $34

   Variable manufacturing overhead -------   $4

   Variable selling and administrative ------   $6

Fixed costs:

   Fixed manufacturing overhead ----------- $185,000

   Fixed selling and administrative ----------    88,200

What is the total period cost for the month under variable costing?

	a.	$185,000
	b.	$117,600
	c.	$273,200
	d.	$302,600

Answer 1

Answer : b ( $ 1,17,600 )

Explanation :

PERIOD COST :- A period cost is an expense which is charged

to expense in the period incurred. Period cost is not included

With in the cost of goods sold on the income statement. It is typically included with in the selling and administrative expenses section of the income statement.

Examples : Selling expenses, advertisement expenses,

Commission expenses,Depreciation expenses etc.

Items that are not period costs :

> Costs included in prepaid expenses

> Costs related to inventory such as Direct material,labour

Manufacturing overhead

> Costs included in Fixed assets

Therefore finally period cost of the current situation

Is = selling and admin expenses both Variable and fixed

= 4900 units * $ 6 per unit + $ 88,200

= $ 29,400 + $88,200

= $ 1,17,600