Your Company is a manufacturing facility that produces highend boots. The actual

Question

Your Company is a manufacturing facility that produces highend boots. The actual manufacturing overhead cost for the previous year was $750,000 and the total direct labor hours incurred were 40,000 hours. The estimated manufacturing overhead cost for the current year are $780,000 and the estimated direct labor hours are 39,000. Overhead is applied using direct labor hours as the activity.
Salaries and wages are run on a single payroll. Of the total 70% is direct labor, 20% are period costs and 15% are indirect labor.
15% of the materials used in production are classiied as indirect materials. The wage rate is $25 per direct labor hour. over or underapplied overhead is closed to cost of goods sold. Below is a list of costs and other information related to the current year:

a. building and equipment depreciation - 100% manufacturing
          180,000

b. raw material inventory 1-1-2015
          250,000
c. raw material purchases
       1,000,000
d. raw material inventory 12-31-15
            50,000
e. delivery costs - inished goods
            10,000
f. inished good inventory 1-1-15
          220,000
g. inished goods inventory 12-31-15
          225,000
h. insurance costs; 80% production the balance period costs
            60,000
i. property taxes ; 80% production the balance period costs
            40,000
j. maintenance costs; all production
            35,000
k. utilities; 90% production the balance period costs
          100,000
l. interest expense - period cost
            20,000
m. salaries and wages
       1,400,000
n. other manufacturing costs
            80,000
o. work-in-process inventory 1-1-15
            70,000
p. work-in-proces inventory 12-31-15
            75,000
q. sales revenue
       3,500,000
r. sales commissions 2% of sales dollars s. legal fees all period cost
            25,000

5. compute the prime costs

6. compute the conversion costs.

7. if 40% of the manufacturing overhead costs are variable what is the total    variable costs?

8. if 75,000 units were produced what was the cost per unit? What was the   variable cost per unit? the fixed cost per unit?

9. if 100,000 units were produced what would be the fixed cost per unit?

Explanation / Answer

Particulars Amount in $ Sales revenue 3500000 Sales commission 70000 Total sales 3570000 Direct material Production 1020000 (opening+purchase-closing)*.85 Direct labour (70% of 1400000)-refer WN-1 980000 Direct expense 0 Total Prime cost 2000000 Manufacturing overhead cost 780000 Overheads =(780000/39000)=$20 Other manufacturing cost 80000 Opening WIP 70000 Closing WIP -75000 Indirect material 180000 indirect labor 210000 Insurance cost =80% 48000 Property tax 32000 Maintenance cost 35000 utilities =90%of 100000 90000 1450000 Cost of goods produced 3450000 Selling and administrative 10000 Opening finished goods 220000 Closing finished goods -225000 Fixed cost : Interest cost 20000 Depreciation 180000 Legal cost 25000 Insurance cost 12000 salary-period cost 280000 Property tax 8000 utilities 10000 540000 Cost of goods sold 3990000 WN-1 Salaries and wages 1400000 Wages =25*39000 975000 salaries 425000 Fixed cost per unit = (total fixed /100000) 5.35 Cost per unit 53.2

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