Return to question bin Companys relevant range of producion

Return to question bin Company\'s relevant range of producion s 14,000 to 20,500 units. When t produces and sell 17250 unlts, is average costs per nit are as follows: Average Cost per Unit 7.50 $4.50 $ 2.00 5.50 4.00 3.00 Direct materials Direct labor Variable manufacturing overhead Pixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales comminsions Variable administrative expense 1.50 $1.00 Required 1. For financial accounting purposes, what is the total amount of product costs incurred to make 17,250 units? 2. For financial accounting purposes, what is the total amount of period costs incurred to sell 17,250 unitsi? 3. For financial accounting purposes, what is the total amount of product costs incurred to make 20,500 units? 4. For financial accounting purposes, what is the total amount of period costs incurred to sell 14,000 units? For all requirements, do not round intermediate calculations.) Answer is complete but not entirely correct 1 2. Total amount of period costs incurred )Tota, armount of product sts 330.375 163,875 0 309750 133.000O 3. Total amount of product costs 4. Total amount of period costs Prex 3 of 7 Next

Solution

Solution - Calculation of Product and period cost

Product cost = Product cost are manufacturing cost incurred in producing the goods.

Product costs is directly related to production which includes material, labour, Manufacturing overhead (Variable and fixed)

Period Cost = Period Cost are non manufacturing cost incurred indirectly and are not related to production.

Period costs are selling expenses and adninistrative expenses

Note 1 - Fixed Manufacturing overhead = $5.5*17250 units = $94875

Note 2 - Fixed Selling expenses = $4*17250 = $69000

Note 3 - Fixed Administrative expenses = $3*17250 = $51750

20500 Units Product cost

$287000

($14*20500)

$94875 (Note 1)

(Fixed cost does not change with the change in the units of production. Fixed cost remains same)

$21000

($1.5*14000)

$14000

($1*14000)

$69000

(Note 2)

(Fixed cost does not change with the change in units of production. It remain constant)

$51750

(Note 3)

(Fixed cost does not change with the change in the unit of production. It remain constant)

Particulars	20500 Units Product cost	14000 units Period cost
Manufacturing cost
Direct Material Per unit	$7.5
Direct Labour per unit	$4.5
Variable overhead per unit	$2.0
Total Variable cost ($7.5 + $4.5 + $2) = $14	$287000 ($14*20500)
Fixed Manufacturing Overhead	$94875 (Note 1) (Fixed cost does not change with the change in the units of production. Fixed cost remains same)
Non Manufacturing cost
Variable Sales commission expenses		$21000 ($1.5*14000)
Variable administrative expenses		$14000 ($1*14000)
Fixed selling expenses		$69000 (Note 2) (Fixed cost does not change with the change in units of production. It remain constant)
Fixed administrative expenses		$51750 (Note 3) (Fixed cost does not change with the change in the unit of production. It remain constant)
Total Cost	$381875	$155750