A manufacturing company that produces a single product has provided the followin

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

What is the total period cost for the month under variable costing?

Selling price $ 165 Units in beginning inventory 0 Units produced 12,700 Units sold 12,000 Units in ending inventory 700 Variable costs per unit: Direct materials $ 53 Direct labor $ 48 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 4 Fixed costs: Fixed manufacturing overhead $ 406,400 Fixed selling and administrative expense $ 216,000

Explanation / Answer

Under variable costing, fixed cost is considered as period costs and variable costs is considered as product costs whereas under absorption costing fixed cost is also considered as product costs along with variable costs (product costs means included in the unit product cost). In the given case, total period cost for the month under variable costing will include fixed manufacturing overhead and fixed selling and administrative expense.

Total Period Cost = Fixed manufacturing overhead+Fixed selling and administrative expense

= $406,400+$216,000 = $622,400

Therefore, the total period cost for the month under variable costing is $622,400.

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