Total variable manufacturing cost
($10.85 per unit × 4,000 units produced)
$
43,400
Total fixed manufacturing overhead cost
($3.00 per unit × 4,000 units produced)
12,000
Total product (manufacturing) cost
$
55,400
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
213) Varela Corporation's relevant range of activity is 2,000 units to 6,000 units. When it produces and sells 4,000 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials
$
5.95
Direct labor
$
3.30
Variable manufacturing overhead
$
1.60
Fixed manufacturing overhead
$
3.00
Fixed selling expense
$
0.50
Fixed administrative expense
$
0.40
Sales commissions
$
1.50
Variable administrative expense
$
0.50
For financial reporting purposes, the total amount of period costs incurred to sell 4,000 units is closest to:
A) $7,700
B) $11,600
C) $3,600
D) $8,000
Answer: B
Explanation:
Sales commissions
$
1.50
Variable administrative expense
0.50
Variable selling and administrative expense per unit
$
2.00
Total variable selling and administrative expense
($2.00 per unit × 4,000 units sold)
$
8,000
Total fixed selling and administrative expense
($0.50 per unit × 4,000 units + $0.40 per unit × 4,000 units)
3,600
Total period (nonmanufacturing) cost
$
11,600
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
214) Lagle Corporation has provided the following information:
Cost per Unit
Cost per Period
Direct materials
$
4.85
Direct labor
$
3.35
Variable manufacturing overhead
$
1.35
Fixed manufacturing overhead
$
8,000
Sales commissions
$
1.50
Variable administrative expense
$
0.45
Fixed selling and administrative expense
$
4,400
For financial reporting purposes, the total amount of product costs incurred to make 4,000 units is closest to:
A) $46,200
B) $38,200
C) $8,000
D) $50,200
Answer: A
Explanation:
Direct materials
$
4.85
Direct labor
3.35
Variable manufacturing overhead
1.35
Variable manufacturing cost per unit
$
9.55
Total variable manufacturing cost
($9.55 per unit × 4,000 units produced)
$
38,200
Total fixed manufacturing overhead cost
8,000
Total product (manufacturing) cost
$
46,200
Difficulty: 1 Easy
Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.