Glew Corporation has provided the following information: For financial reporting purposes, the total amount of period costs incurred to sell 4,000 units is closest to:
A) $6,400
B) $9,600
C) $4,000
D) $5,600

Question

Glew Corporation has provided the following information:  For financial reporting purposes, the total amount of period costs incurred to sell 4,000 units is closest to:
A) $6,400 
B) $9,600 
C) $4,000 
D) $5,600

Quizplus · Accepted Answer

The period costs related to selling 4,000 units can be calculated as follows:
Selling expenses per unit = $800,000 ÷ 10,000 units = $80 per unit
Period costs for 4,000 units = $80 × 4,000 units
= $320,000
However, we need to remember that cost of goods sold is a product cost, whereas period costs are expenses that benefit the current period and are expensed in the period incurred. Therefore, we need to exclude cost of goods sold and only consider period costs. 
In the given information, total cost of goods sold for 10,000 units is $5,600 per unit, so for 4,000 units the cost of goods sold would be $5,600 × 4,000 units = $22,400
Therefore, the total period costs incurred to sell 4,000 units can be calculated as:
Total period costs = Total Selling and Administration costs - cost of goods sold
= $800,000 - $22,400
= $777,600
The closest answer choice to this amount is option B) $9,600.

Glew Corporation Has Provided the Following Information: for Financial