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Kubin Company’s relevant range of production is 30,000 to 35,000 units. When it produces and sells 32,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 9. 00 Direct labor $ 6. 00 Variable manufacturing overhead $ 3. 50 Fixed manufacturing overhead $ 7. 00 Fixed selling expense $ 5. 50 Fixed administrative expense $ 4. 50 Sales commissions $ 3. 00 Variable administrative expense $ 2. 50 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 32,500 units? 2. For financial accounting purposes, what is the total amount of period costs incurred to sell 32,500 units? 3. For financial accounting purposes, what is the total amount of product costs incurred to make 35,000 units? 4. For financial accounting purposes, what is the total amount of period costs incurred to sell 30,000 units? (For all requirements, do not round intermediate calculations. )
Kubin Company’s relevant range of production is 30,000 to 35,000 units. When it produces and sells 32,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 9. 00 Direct labor $ 6. 00 Variable manufacturing overhead $ 3. 50 Fixed manufacturing overhead $ 7. 00 Fixed selling expense $ 5. 50 Fixed administrative expense $ 4. 50 Sales commissions $ 3. 00 Variable administrative expense $ 2. 50 Required: 1. For financial accounting purposes, what is the total amount of product costs incurred to make 32,500 units? 2. For financial accounting purposes, what is the total amount of period costs incurred to sell 32,500 units? 3. For financial accounting purposes, what is the total amount of product costs incurred to make 35,000 units? 4. For financial accounting purposes, what is the total amount of period costs incurred to sell 30,000 units? (For all requirements, do not round intermediate calculations. )
Answer:1. For financial accounting purposes, the total amount of product costs incurred to make 32,500 units is calculated as follows:Direct materials: $9.00 x 32,500 units = $292,500Direct labor: $6.00 x 32,500 units = $195,000Variable manufacturing overhead: $3.50 x 32,500 units = $113,750Fixed manufacturing overhead: $7.00 x 32,500 units = $227,500Total product costs incurred = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead = $292,500 + $195,000 + $113,750 + $227,500 = $828,7502. For financial accounting purposes, the total amount of period costs incurred to sell 32,500 units is calculated as follows:Fixed selling expense: $5.50 x 32,500 units = $178,750Fixed administrative expense: $4.50 x 32,500 units = $146,250Sales commissions: $3.00 x 32,500 units = $97,500Variable administrative expense: $2.50 x 32,500 units = $81,250Total period costs incurred = Fixed selling expense + Fixed administrative expense + Sales commissions + Variable administrative expense = $178,750 + $146,250 + $97,500 + $81,250 = $503,7503. For financial accounting purposes, the total amount of product costs incurred to make 35,000 units can be estimated using the high end of the relevant range (35,000 units). The fixed manufacturing overhead remains the same, so the calculation is as follows:Direct materials: $9.00 x 35,000 units = $315,000Direct labor: $6.00 x 35,000 units = $210,000Variable manufacturing overhead: $3.50 x 35,000 units = $122,500Total product costs incurred = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead = $315,000 + $210,000 + $122,500 + $227,500 = $875,0004. For financial accounting purposes, the total amount of period costs incurred to sell 30,000 units can be estimated using the low end of the relevant range (30,000 units). The fixed selling expense and fixed administrative expense remain the same, so the calculation is as follows:Sales commissions: $3.00 x 30,000 units = $90,000Variable administrative expense: $2.50 x 30,000 units = $75,000Total period costs incurred = Fixed selling expense + Fixed administrative expense + Sales commissions + Variable administrative expense = $178,750 + $146,250 + $90,000 + $75,000 = $489,000...