VMW Topic: Week 1:. Definition of Cogni.Assignmens:AWeek 1 Homework Shulmans Com
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VMW Topic: Week 1:. Definition of Cogni.Assignmens:AWeek 1 Homework Shulmans Company manufactures a beautiful bookcase that enjoys widespread popularity. The company has a backlog of orders that is large enough to keep production going indefinitely at the plant's full capacity of 4,020 bookcases per year. Annual cost data at full capacity follow Direct materials used (wood and glass) Administrative office salaries Factory supervision Sales commissions Depreciation, factory building Depreciation, administrative office equipment Indirect materials, factory Factory labor (cutting and assembly) S432,600 $ 112,200 S 68,100 S 65,800 $ 102,100 $ 2,110 20,100 $ 88,600 $98,600 $ 6,160 $ 4,150 $ 17,200 $ 46,000 Insurance, factory Administrative office supplies (billing) Property taxes, factory Utilities, factory Required: 1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item its classified in two ways: first, as either variable or fixed with respect to the number of units produced and sold, and second, as either a selling and administrative cost or a product cost. (If the item is a product cost, it should also be classifed as either direct or indirect.) Cost Behavior Selling or Administrative Cost Product Ct t Item Variable Fixed S 432,600 Direct materials used (wood, glass) $ 432,600 Administrative office salaries Factory supervision Sales commissions Depreciation, factory building Depreciation, admin office equipment 112,200 112,200 Indirect matorials, factory F actory labor (outting and assembly Insurance, factory Administrative office supplies (billing) Property taxes, factory Utlities, factory Total costs S 432.600$ 112.200 $ 112.200 $ 432,600 sExplanation / Answer
1.
Direct Materials used (wood,glass) - Variable cost - Direct cost - 4,32,600 - $107.61 / bookcase
Administrative office salaries - Fixed cost - Selling or Administrative cost - 1,12,200
Factory supervision - Fixed cost - Indirect cost - 68,100
Sales commission - Variable cost - Selling or Administrative cost - 65,800 - $16.37 / bookcase
Depreciation of factory building - Fixed cost - Indirect cost - 1,02,100
Depreciation of admin office equipment - Fixed cost - Selling or Administrative cost - 2,110
Indirect factory material - Variable cost - Indirect cost - 20,100 - $5 / bookcase
Factory labour (cutting & assembly) - Variable cost - Direct cost - 88,600 - $22.03 / bookcase
Advertising - Fixed cost - Selling or Administrative cost - 98,600
Factory insurance - Fixed cost - Indirect cost - 6,160
Administrative office supplies (billing) - Fixed cost - Selling or Administrative cost - 4,150
Property tax of factory - Fixed cost - Indirect cost - 17,200
Factory utilities - Variable cost - Indirect cost - 46,000 - $11.44 / bookcase
Totals :
Variable costs : $6,53,100
Fixed costs : $4,10,620
Selling or Administrative costs : $2,82,860
Direct costs : $5,21,200
Indirect costs : $2,59,660
2. Total Product cost = Total Direct costs + Total Indirect costs = 521200 + 259660 = $7,80,860
Average product cost per bookcase = Total Product cost / Total no. of bookcases = 780860 / 4020 = $194
3. If production drops to 2,110 bookcases per year, fixed costs will remain the same.
Variable costs will change as follows -
Direct Materials used (wood,glass) : 107.61 * 2110 = 227057
Sales commission : 16.37 * 2110 = 34541
Indirect factory material : 5 *2110 = 10550
Factory labour : 22.03 * 2110 = 46483
Factory utilites : 11.44 * 2110 = 24138
Total Variable Costs = $3,42,769
Selling or Administrative expenses except sales commission will remain the same as they are fixed. Only Sales commission cost will decrease by : (16.37 * 4020) - (16.37 * 2110) = 65807 - 34541 = 31266
Hence, the total selling and administrative costs will decrease by the same amount , i.e, by $31,266.
So total selling and administrative costs will be = 282860 - 31266 = $2,51,594
Total Fixed costs + Total Variable costs = Total selling & administrative costs + Total Product cost
410620 + 342769 = 251594 + Total Product cost
Hence, Total Product cost = $5,01,795
Average Product cost per bookcase = 501795 / 2110 = $237.82
Hence, the average product cost per bookcase has increased.
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