Question

Kubin Company’s relevant range of production is 19,000 to 20,000 units. When it produces and sells 19,500 units, its average costs per unit are as follows:

  

	Average Cost per Unit
Direct materials	$	7.90
Direct labor	$	4.90
Variable manufacturing overhead	$	2.40
Fixed manufacturing overhead	$	5.90
Fixed selling expense	$	4.40
Fixed administrative expense	$	3.40
Sales commissions	$	1.90
Variable administrative expense	$	1.40

Required:

A. For financial accounting purposes, what is the total amount of product costs incurred to make 19,500 units?

B. For financial accounting purposes, what is the total amount of period costs incurred to sell 19,500 units?

C. For financial accounting purposes, what is the total amount of product costs incurred to make 20,000 units?

D. financial accounting purposes, what is the total amount of period costs incurred to sell 19,000 units?

Answer 1

Particulars	Product Costs	Period Costs
Definition	Costs incurred to manufacture a product	Costs that are not incurred to manufacture a product and, therefore, cannot be assigned to the product
Comprises of:	Manufacturing and production costs	Non-manufacturing costs
Examples	Raw material, wages on labor, production overheads, rent on the factory, etc.	Marketing costs, sales costs, audit fees, rent on the office building, etc.

				Units	Units	Units
Particulars	Type	Average Cost per Unit		19500	20000	19000
Direct materials	Product Cost	$	7.9	154,050	158,000	150,100
Direct labor	Product Cost	$	4.9	95,550	98,000	93,100
Variable manufacturing overhead	Product Cost	$	2.4	46,800	48,000	45,600
Fixed manufacturing overhead	Product Cost	$	5.9	115,050	118,000	112,100
			Total Product Cost	411,450	422,000	400,900

				Units	Units	Units
Particulars	Type	Average Cost per Unit		19500	20000	19000
Fixed selling expense	Period Cost	$	4.4	85,800	88,000	83,600
Fixed administrative expense	Period Cost	$	3.4	66,300	68,000	64,600
Sales commissions	Period Cost	$	1.9	37,050	38,000	36,100
Variable administrative expense	Period Cost	$	1.4	27,300	28,000	26,600
			Total Period Cost	216,450	222,000	210,900