Method of Inventory: Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods: FIFO: Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period. LIFO: Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory. Average cost method: Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period. To Explain: the difference in the accounting treatment of a change to the LIFO inventory method from other inventory method changes.

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Kubin Company’s relevant range of production is 11,000 to 14,000 units. When it produces and sells 12,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 7.20 Direct labor $ 4.20 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 5.20 Fixed selling expense $ 3.70 Fixed administrative expense $ 2.70 Sales commissions $ 1.20 Variable administrative expense $ 0.70 Required: For financial accounting purposes, what is the total product cost incurred to make 12,500 units? For financial accounting purposes, what is the total period cost incurred to sell 12,500 units? For financial accounting purposes, what is the total product cost incurred to make 14,000 units? For financial accounting purposes, what is the total period cost incurred to sell 11,000 units?

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Chapter 9, Problem 9.15Q

To determine

Method of Inventory: Inventory refers to the current assets that a company expects to sell during the normal course of business operations, the goods that are under process to be completed for future sale, or currently used for producing goods to be sold in the market. Inventory is valued under three methods:

FIFO: Under this inventory method, the units that are purchased first, are sold first. Thus, it starts from the selling of the beginning inventory, followed by the units purchased in a chronological order of their purchases took place during a particular period.

LIFO: Under this inventory method, the units that are purchased last, are sold first. Thus, it starts from the selling of the units recently purchased and ending with the beginning inventory.

Average cost method: Under this method, the cost of the goods available for sale is divided by the number of units available for sale during a particular period.

To Explain: the difference in the accounting treatment of a change to the LIFO inventory method from other inventory method changes.

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Kubin Company’s relevant range of production is 11,000 to 14,000 units. When it produces and sells 12,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 7.20 Direct labor $ 4.20 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 5.20 Fixed selling expense $ 3.70 Fixed administrative expense $ 2.70 Sales commissions $ 1.20 Variable administrative expense $ 0.70 Required: For financial accounting purposes, what is the total product cost incurred to make 12,500 units? For financial accounting purposes, what is the total period cost incurred to sell 12,500 units? For financial accounting purposes, what is the total product cost incurred to make 14,000 units? For financial accounting purposes, what is the total period cost incurred to sell 11,000 units?

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