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

Question Completion:

Kubin Company’s relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows:

                                   Average Cost per Unit  

Direct materials                            $7.00                    $7.00

Direct labor                                    $4.00                    $4.00

Variable manufacturing overhead   $1.50                     $1.50

Fixed manufacturing overhead   $5.00                     $5.00

Fixed selling expense                   $3.50

Fixed administrative expense   $2.50

Sales commissions                   $1.00

Variable administrative expense   $0.50

Total                                                 $25.00                  $17.50

Required:

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

For financial accounting purposes, the total amount of product costs incurred to make 20,000 units is:

$350,000.

Explanation:

a) Data and Calculations:

Relevant product cost elements:

                                   Average Cost per Unit  

Direct materials                            $7.00

Direct labor                                    $4.00

Variable manufacturing overhead   $1.50

Fixed manufacturing overhead   $5.00  

Total product cost per unit              $17.50

Total product costs for 20,000 units = $17.50 * 20,000 = $350,000

b) Product costs are the costs that are incurred to make a product. These costs usually include costs of direct labor, direct materials, consumable production supplies, and factory overhead.

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