Bell Company, a manufacturer of audio systems, started its production in October
ID: 2498375 • Letter: B
Question
Bell Company, a manufacturer of audio systems, started its production in October 2014. 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 $77 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 $5,226 per month. Indirect materials cost $6 per system. A supervisor was hired to oversee production; her monthly salary is $3,738.
Factory janitorial costs are $2,038 monthly. Advertising costs for the audio system will be $8,900 per month. The factory building depreciation expense is $6,564 per year. Property taxes on the factory building will be $8,940 per year.
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(a)
Product Costs
Cost Item
Direct
Materials
Direct
Labor
Manufacturing
Overhead
Period
Costs
Bell Company, a manufacturer of audio systems, started its production in October 2014. 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 $77 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 $5,226 per month. Indirect materials cost $6 per system. A supervisor was hired to oversee production; her monthly salary is $3,738.
Factory janitorial costs are $2,038 monthly. Advertising costs for the audio system will be $8,900 per month. The factory building depreciation expense is $6,564 per year. Property taxes on the factory building will be $8,940 per year.
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Explanation / Answer
Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Raw Materials $77 per unit Wages for workers $13*6 = $78 per unit Rent on equipment $5,226 per month Indirect materials $6 per unit Factory supervisor's salary $3,738 per month Janitorial costs $2038 per month Advertising $8900 per month Depreciation on factory building $6564 per year or $547 per month Property taxes on factory building $8940 per year or $745 per month
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