PFA Ltd uses a throughput costing system and reported the following information for its first month of operations: Units produced…………………………………..140
Units sold………………………………………..120
Material cost per unit produced……………….$3.50
Conversion cost per unit produced……………$6.50
Fixed period costs per unit produced………….$6.00
Variable period costs per unit produced………$4.00
Selling price per unit…………………………$25.00
Total period costs reported on PFA's throughput costing income statement were

Question

Quizplus · Accepted Answer

Under the throughput costing system, only direct material costs and direct conversion costs are considered as product costs. Fixed and variable period costs are treated as period costs and are not included in the cost of goods sold.

Calculation of product costs:

Direct material cost per unit produced = $3.50 
Direct conversion cost per unit produced = $6.50 
Total product cost per unit produced = $10.00

Cost of goods sold for 120 units = 120 units x $10.00 per unit = $1,200

Calculation of total period costs:

Fixed period costs per unit produced = $6.00 
Variable period costs per unit produced = $4.00 
Total period costs per unit produced = $10.00

Total period costs for 140 units produced = 140 units x $10.00 per unit = $1,400

Therefore, the total period costs reported on PFA's throughput costing income statement were $1,400 (choice C).

PFA Ltd Uses a Throughput Costing System and Reported the Following