Bell Company, a manufacturer of audio systems, started its production in October

Question

Bell Company, a manufacturer of audio systems, started its production in October 2017. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory. Raw materials cost for an audio system will total $75 per unit. Workers on the production lines are on average paid $13 per hour. An audio system usually takes 6 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $5,260 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,780. Factory janitorial costs are $2,060 monthly. Advertising costs for the audio system will be $9,050 per month. The factory building depreciation expense is $6,960 per year. Property taxes on the factory building will be $8,520 per year. (a) Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.

Explanation / Answer

Part A

Product costs Period costs Cost item Direct materials direct labor manufacturing overhead Raw materials 112500 (1500*75) Wages for workers 117000 (1500*13*6) Rent on equipment 5260 Indirect materials 7500 (5*1500) Supervisor's salary 3780 Factory janitorial 2060 Advertising 9050 Depreciation on factory building 580 (6960/12) Property taxes 710 (8520/12) Total 112500 117000 19890 9050

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