Question

Learned Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 5.30 Direct labor $ 3.75 Variable manufacturing overhead $ 1.35 Fixed manufacturing overhead $ 36,000 Sales commissions $ 0.70 Variable administrative expense $ 0.60 Fixed selling and administrative expense $ 12,000 Required: a. For financial reporting purposes, what is the total amount of product costs incurred to make 8,000 units

Answer 1

Answer:

$119,200

Explanation:

The Absorption Costing method is recommended by GAAP or IFRS for financial reporting instead of Variable Costing method.

Thus to calculate product costs under absorption costing, we add the total of all manufacturing costs (Variable and Fixed),

Non - Manufacturing costs are treated as Period Costs which are expensed in the Income Statement.

Direct materials ($ 5.30 x 8,000 units)                                  $42,400

Direct labor ($ 3.75 x 8,000 units)                                         $30,000

Variable manufacturing overhead ($ 1.35 x 8,000 units)      $10,800

Fixed manufacturing overhead                                             $ 36,000

Total Product Cost                                                                  $119,200

therefore,

The total amount of product costs incurred to make 8,000 units is $119,200.