Kabana Company, a manufacturer of stereo systems, started its production in Octo
ID: 2356438 • Letter: K
Question
Kabana Company, a manufacturer of stereo systems, started its production in October 2012. For the preceding 3 years Kabana had been a retailer of stereo systems. After a thorough survey of stereo system markets, Kabana decided to turn its retail store into a stereo equipment factory. Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to 4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000. Factory janitorial cost are $1,3000 monthly. Advertising costs for the stereo system will be $8,5000 per month. The factory building depreciation expense is $7,2000 per year. Property taxes on the factory building will be 9,000 per year. Instructions Compute the cost to produce one stereo system.Explanation / Answer
Cost Statement
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UnitCost TotalCost
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Production Per month 1300 Stereos
RawMaterials 74.00 96,200
Labor ( 12 X 5 perstereo) 60.00 78,000
IndirectMaterilas 5.00 6,500
PrimeCost 139.00 180,700
FactoryRent 3.77 4,900
Supervisor'sSalary 2.31 3,000
Janitoral 1.00 1,300
Depreciation on FactoryBldg. 5.53 7,200
Property Tax on FactoryBldg. 6.92 9,000
FactoryCost 158.53 206,100
Advertising 6.54 8,500
TotalCost 165.07 214,600
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