c. If 5,000 units are produced, what is the total amount of manufacturing overhead cost incurred?
Answer:
a.
Direct materials
$6.25
Direct labor
3.25
Variable manufacturing overhead
1.45
Sales commissions
0.50
Variable administrative expense
0.40
Variable cost per unit sold
$11.85
b.
Variable cost per unit sold (a)
$11.85
Number of units sold (b)
5,000
Total variable costs (a) × (b)
$59,250
c.
Total variable manufacturing overhead cost
($1.45 per unit × 5,000 units)
$7,250
Total fixed manufacturing overhead cost
18,000
Total manufacturing overhead cost (a)
$25,250
Difficulty: 1 Easy
Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
283) A partial listing of costs incurred at Boylen Corporation during March appears below:
Direct materials
$
181,000
Utilities, factory
$
10,000
Sales commissions
$
69,000
Administrative salaries
$
99,000
Indirect labor
$
32,000
Advertising
$
75,000
Depreciation of production equipment
$
28,000
Direct labor
$
120,000
Depreciation of administrative equipment
$
49,000
Required:
a. What is the total amount of product cost listed above? Show your work.
b. What is the total amount of period cost listed above? Show your work.
Answer:
a. Product costs consist of direct materials, direct labor, and manufacturing overhead:
Direct materials
$
181,000
Direct labor
120,000
Manufacturing overhead:
Utilities, factory
$
10,000
Indirect labor
32,000
Depreciation of production equipment
28,000
70,000
Total product cost
$
371,000
b. Period costs consist of all costs other than product costs:
Sales commissions
$
69,000
Administrative salaries
99,000
Advertising
75,000
Depreciation of administrative equipment
49,000
Total period cost
$
292,000
Difficulty: 2 Medium
Topic: Cost Classifications for Preparing Financial Statements
Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
284) Mary Tappin, an assistant Vice President at Galaxy Toys, was disturbed to find on her desk a memo from her boss, Gary Resnick, to the controller of the company. The memo appears below:
GALAXY TOYS INTERNAL MEMO
Sept 15
To: Harry Wilson, Controller
Fm: Gary Resnick, Executive Vice President
As you know, we won't start recording many sales until October when stores start accepting shipments from us for the Christmas season. Meanwhile, we are producing flat-out and are building up our finished goods inventories so that we will be ready to ship next month.
Unfortunately, we are in a bind right now since it looks like the net income for the quarter ending on Sept 30 is going to be pretty awful. This may get us in trouble with the bank since they always review the quarterly financial reports and may call in our loan if they don't like what they see. Is there any possibility that we could change the classification of some of our period costs to product costs—such as the rent on the finished goods warehouse?
Please let me know as soon as possible. The President is pushing for results.