Pearl Co. both purchases and constructs various equipment it uses in its operati

Question

Pearl Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2017.

Compute the total cost for each of these two pieces of equipment.

Purchase Cash paid for equipment, including sales tax of $6,200 $130,200 Freight and insurance cost while in transit 2,480 Cost of moving equipment into place at factory 3,844 Wage cost for technicians to test equipment 4,960 Insurance premium paid during first year of operation on this equipment 1,860 Special plumbing fixtures required for new equipment 9,920 Repair cost incurred in first year of operations related to this equipment 1,612 Construction Material and purchased parts (gross cost $248,000; failed to take 2% cash discount) $248,000 Imputed interest on funds used during construction (stock financing) 17,360 Labor costs 235,600 Allocated overhead costs (fixed-$24,800; variable-$37,200) 62,000 Profit on self-construction 37,200 Cost of installing equipment 5,456

Explanation / Answer

Purchase Equipment              = $ 1,51,404

Construction Equipment       = $ 5,46,096

Purchase Equipment

Cash paid for equipment, including sales tax $1,30,200

Freight and insurance cost while in transit $2,480

Cost of moving equipment into place at factory $3,844

Wage cost for technicians to test equipment $4,960

Special plumbing fixtures required for new equipment $9,920

TOTAL $ 1,51,404

Construction Equipment

Material and purchased parts ($248000 x 98%) $ 2,43,040

Labor costs $2,35,600

Allocated overhead costs $ 62,000

Cost of installing equipment                                         $ 5,456

TOTAL                                                                         $ 5,46,096

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