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 direct labor $ 4.00 variable manufacturing overhead $ 1.50 fixed manufacturing overhead $ 5.00 fixed selling expense $ 3.50 fixed administrative expense $ 2.50 sales commissions $ 1.00 variable administrative expense $ 0.50 required: 1. for financial accounting purposes, what is the total amount of product costs incurred to make 20,000 units? 2. for financial accounting purposes, what is the total amount of period costs incurred to sell 20,000 units? 3. for financial accounting purposes, what is the total amount of product costs incurred to make 22,000 units? 4. for financial accounting purposes, what is the total amount of period costs incurred to sell 18,000 units?

Production costs and period costs for the company are :

Product costs 20,000 units = $ 350,000

Cost period is 20,000 units = $ 150,000

Product costs 22,000 units = $ 385,000

Period cost 18,000 units = $ 135,000

In producing an item, the company has 2 main costs, namely production costs and period costs.

Production costs are costs that are directly related to the production process. These costs include labor costs, raw material costs, and overhead costs.

While period costs are costs incurred for the company's operations such as administrative costs, selling/sales costs

Existing production costs for each unit:

$ 7.00 direct labor $ 4.00 manufacturing variable overhead $ 1.50 fixed manufacturing overhead $ 5.00

total product cost / unit = $ 7.00 + $ 4.00+ $ 1.50 + $ 5.00 = $ 17.5

So that for 20,000 units it becomes: 20,000 x $ 17.5 = $ 350,000

Cost period for each unit:

fixed selling expense $ 3.50 fixed administrative expense $ 2.50 sales commissions $ 1.00 administrative expense variable $ 0.50

total period cost / unit = $ 3.5 + $ 2.5+ $ 1.00 + $ 0.5 = $ 7.5

So that for 20,000 units it becomes: 20,000 x $ 7.5 = $ 150,000

Existing production costs for each unit: = $ 17.5

So that for 20,000 units it becomes: 22,000 x $ 17.5 = $ 385,000

total period cost / unit = $ 7.5

So for 18,000 units it becomes: 18,000 x $ 7.5 = $ 135,000

the cost of manufacturing product

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an example of a fixed cost

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The cost of materials

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average costs per unit

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Keywords: period cost, product cost

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