Lott Company specializes in manufacturinga unique model of bicycle helmet. The m
ID: 2461155 • Letter: L
Question
Lott Company specializes in manufacturinga unique model of bicycle helmet. The model is well accepted by consumers and the company produces 10,000 helmets per month. The monthly manufactuirng costs and other expense data is as follows Rent on factory equipment $ 9,000 Insurance on factory building 1,500 Raw materials 75,000 Utiltiy costs for factory 900 Supplies for office 300 Assembly workers wages 53,000 Depreciation on Office equipment 800 Miscellaneous materials 1,100 Factory manager's salary 5,700 Property taxes on factory building 400 Advertising for helmets 14,000 Sales commissions 10,000 Depreciation on factory building 1,500 Requirements
1. Classify each cost as Direct Materials, Direct Labor, Manufacturing Overhead or Period Cost
2. Calculate the to produce each helmet
Explanation / Answer
1.
Classification of costs
Direct materials:
Raw materials
$75,000
Direct Labor:
Assembly workers wages
$53,000
Manufacturing overhead:
Rent on factory equipment
$9,000
Insurance on factory building
$1,500
Utility cost for factory
$900
Misc materials
$1,100
Factory manager’s salary
$5,700
Property taxes on factory building
$400
Depreciation on factory building
$1,500
Total manufacturing overhead
$20,100
Period cost:
Supplies for office
$300
Depreciation on office equipment
$800
Advertising
$14,000
Sales commission
$10,000
Total period cost
$25,100
Total cost
$173,200
2.
Cost of producing each “h” = (Material cost + Labor cost + Manufacturing overhead) / Number of units
= ($75,000 + $53,000 + $20,100) / 10,000
= $148,100 / 10,000
= $14.81
Direct materials:
Raw materials
$75,000
Direct Labor:
Assembly workers wages
$53,000
Manufacturing overhead:
Rent on factory equipment
$9,000
Insurance on factory building
$1,500
Utility cost for factory
$900
Misc materials
$1,100
Factory manager’s salary
$5,700
Property taxes on factory building
$400
Depreciation on factory building
$1,500
Total manufacturing overhead
$20,100
Period cost:
Supplies for office
$300
Depreciation on office equipment
$800
Advertising
$14,000
Sales commission
$10,000
Total period cost
$25,100
Total cost
$173,200
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