Question

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $3,330 and is paid at the beginning of the first year. Ninety percent of the premium applies to manufacturing operations and ten percent applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage? 2:25 Period Product $3,330 $2,997 $1,998 $999 $333 $222 $111 Multiple Choice O Choice A 0 O Choice B 0 Choice 0 Choice D

Answer 1

Solution 1:

Product costs = $3,330*90% = $2,997

Period cost = $3,330 *10% = $333

Hence option B is correct.

Solution 2:

Variable cost per unit sold = $6.70 + $3.60 + $1.60 + $0.85 + $0.50 = $13.25 per unit

Solution 3:

Fixed manufacturing cost = 4800 * Fixed manufacturing overhead per unit = 4800 * $2.50 = $12,000

Solution 4:

Variable cost per machine hour = $888,860 / 9800 = $90.70

Total production engineering cost per machine hour = Variable cost per machine hour + Fixed cost per machine hour

= $90.70 + ($254,430 / 9900) = $116.40

Hence 3rd option is correct,