Question

Kubin Company’s relevant range of production is 24,000 to 31,000 units. When it produces and sells 27,500 units, its average costs per unit are as follows:

Answer 1

Answer:

1. total product costs incurred to make 27,500 units = $25.10 x 27,500 = $690,250
2. total period costs incurred to make 27,500 units = $15.10 x 27,500 = $415,250
3. total product costs incurred to make 31,000 units = $25.10 x 31,000 = $778,100
4. total period costs incurred to make 24,000 units = $15.10 x 24,000 = $362,400

Explanation:

                                                       Average Cost per Unit

• Direct materials                                   $8.90
• Direct labor                                           $5.90
• Variable manufacturing overhead   $3.40
• Fixed manufacturing overhead           $6.90
• Fixed selling expense                           $5.40
• Fixed administrative expense           $4.40
• Sales commissions                           $2.90
• Variable administrative expense           $2.40

Product costs include direct labor, direct materials, production supplies, and factory overhead. Product costs per unit = $8.90 + $5.90 + $3.40 + $6.90 = $25.10

Period costs include selling and administrative expenses. Period costs per unit = $5.40 + $4.40 + $2.90 + $2.40 = $15.10