Computation of Product Unit Cost MS Company uses job ordercosting to determine the product unit cost of one of its productsbased on the following costs incurred during March: liabilityinsurance, manufacturing, $3,500; rent, sales office, $3,000;depreciation, manufacturing equipment, $5,000; direct materials,$34,000; indirect labor, manufacturing, $3,600; indirect materials,$2,000; heat, light, and power, manufacturing, $2,500; fireinsurance, manufacturing, $2,400; depreciation, sales equipment,$5,000; rent, manufacturing, $4,000; direct labor, $20,000;manager's salary, manufacturing, $4,800; president's salary,$6,000; sales commissions, $8,000; and advertising expenses,$3,000. The Inspection Department reported that 40,900 good unitswere produced during March.
Determine the unit product cost. $ per unit
Computation of Product Unit Cost MS Company uses job ordercosting to determine the product unit cost of one of its productsbased on the following costs incurred during March: liabilityinsurance, manufacturing, $3,500; rent, sales office, $3,000;depreciation, manufacturing equipment, $5,000; direct materials,$34,000; indirect labor, manufacturing, $3,600; indirect materials,$2,000; heat, light, and power, manufacturing, $2,500; fireinsurance, manufacturing, $2,400; depreciation, sales equipment,$5,000; rent, manufacturing, $4,000; direct labor, $20,000;manager's salary, manufacturing, $4,800; president's salary,$6,000; sales commissions, $8,000; and advertising expenses,$3,000. The Inspection Department reported that 40,900 good unitswere produced during March.
Determine the unit product cost. $ per unit
Related questions
1) All of the following are examples of product costs except:
depreciation on the company's administrative offices.
salary of the plant manager.
insurance on the factory equipment.
rental costs of the factory facility.
2) Period costs:
are treated as expenses in the period they are incurred
are directly traceable to products
include direct labor
are also referred to as manufacturing overhead costs
.
3) Axle and Wheel Manufacturing currently produces 1,000 axles per month. The following per unit data apply for sales to regular customers:
Direct materials $30
Direct manufacturing labor 5
Variable manufacturing overhead 10
Fixed manufacturing overhead 40
Total manufacturing costs $85
The plant has capacity for 2,000 axles and is considering expanding production to 1,500 axles. What is the total cost of producing 1,500 axles?
a. $85,000
b. $170,000
c. $107,500
d. $102,500
4) In the preparation of the schedule of Cost of Goods Manufactured, the accountant incorrectly included as part of manufacturing overhead the rental expense on the firm's retail facilities. This inclusion would:
overstate period expenses on the income statement.
overstate the cost of goods sold on the income statement.
understate the cost of goods manufactured.
have no effect on the cost of goods manufactured.
5) In CVP analysis, focusing on target net income rather than operating income:
a. will increase the breakeven point
b. will decrease the breakeven point
c. will not change the breakeven point
d. does not allow calculation of breakeven point
6) A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases.
a. True
b. False
7) As activity increases within the relevant range, fixed costs remain constant on a per unit basis.
a. True
b. False
8) Which of the following statements is correct with regard to a CVP graph?
A CVP graph shows the maximum possible profit.
A CVP graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.
A CVP graph assumes that total expense varies in direct proportion to unit sales.
A CVP graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales.
9) How would the following costs be classified (product or period) under variable costing at a retail clothing store?
| Cost of purchasing clothing | Sales commissions | |
| a. | Product | Product |
| b. | Product | Period |
| c. | Period | Product |
| d. | Period | Period |
10) The principal difference between variable costing and absorption costing centers on:
whether variable manufacturing costs should be included as product costs.
whether fixed manufacturing costs should be included as product costs.
whether fixed manufacturing costs and fixed selling and administrative costs should be included as product costs.
none of these.
11) Joe has a hot dog cart that he parks on the NY sidewalk and sells hotdogs during the day. The variable cost of a hot dog is $.90. The selling price of the hot dog is $2.00. The fixed cost is $3,000 per month which covers the loan for the cart and the salary Joe needs to make to live. How many hotdogs must Joe sell in one month in order to break even?
3,300 hot dogs
3,000 hot dogs
2,727.27 hot dogs
2,728 hot dogs
12) Shun Corporation manufactures and sells a hand held calculator. The following information relates to Shun's operations for last year:
| Unit product cost under variable costing.......................... | $5.20 per unit | |
| Fixed manufacturing overhead cost for the year.............. | $260,000 | |
| Fixed selling and administrative cost for the year............ | $180,000 | |
| Units (calculators) produced and sold.............................. | 400,000 |
What is Shun's unit product cost under absorption costing for last year?
$4.10
$4.55
$5.85
$6.30.
Use the following information to answer questions 13 to 15:
Barnett Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in Department M. Conversion costs were 75% complete with respect to the 4,000 units in work in process at May 1 and 50% complete with respect to the 6,000 units in work in process at May 31. During May, 14,000 units were started, 12,000 units were completed and transferred to the next department.
13) Calculate the number of equivalent units for materials.
10,000 units
12,000 units
14,000 units
15,000 units
18,000 units
14) Calculate the number of equivalent units for conversion?
10,000 units
12,000 units
14,000 units
15,000 units
18,000 units
15) An analysis of the costs relating to work in process at May 1 and to production activity for May follows:
| Materials | Conversion | ||
| Work in process 5/1....................... | $13,800 | $3,740 | |
| Costs added during May................ | $42,000 | $26,260 |
The total cost per equivalent unit for May was:
$5.02
$5.10
$5.12
$5.25
| Step 1 | You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. This is a no nail, no screw, and no glue manufacturing ( no indirect materials used). You will be keeping track of the costs incurred to manufacture the tables. | |||
| The cost of the direct materials that can be used to manufacture the table are as follows. These cost are on a per unit basis. | ||||
| Table Top | $ 1,100.00 | |||
| Table Leg | $ 200.00 | |||
| Drawer | $ 310.00 | |||
| Assume a $25 per hour wage rate to the assembly employees. | ||||
| The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours. | ||||
| The company estimates that there will be 12 direct labor hours worked during the month. | ||||
| The estimated manufacturing overhead cost for the month is: | ||||
| a. | Factory supervisor salary per month | $ 3,000.00 | ||
| b. | Rent for the factory per month | $ 600.00 | ||
| c. | Depreciation of factory equipment per month | $ 600.00 | ||
| Total Estimated manufacturing overhead | $ 4,200.00 | |||
| What is the predetermined manufacturing overhead rate? | ||||
| Step 2 | The first order you received was to manufacture a table using a table top and four legs. This is your Job #1. Go to the "Job #1 Cost Sheet" tab. There are three assembly employees that spend 2 hours each to make the table. Here, you will calculate the cost of making the table by calculating the direct material, direct labor and applied overhead cost. Complete the job cost sheet by calculating the direct material, direct labor and manufacturing overhead applied that would be incurred for job #1. | |||
| Step 3 | The customer that has ordered Job #2, wants a table that is the same as Job #1, but wants to also add a drawer to the table. There are three assembly employees that spend 3 hours each to make the table. On the "Job #2 Cost Sheet" tab you calculate the cost of making the table by calculating the direct material, direct labor and applied overhead cost. | |||
| Step 4 | Here you will find a list of transactions that must be recorded for the company for the month of December. On the "General Journal" tab, you will record all of these entries in proper journal entry format. The following is a list of transactions that need to be recorded for the company for activity in the month of December. Record these in the "General Journal" tab using the proper journal entry format. Please use the following accounts: Accounts Receivables, Raw materials, Work in process, Finished goods, Accumulated depreciation, Accounts payable, Salaries and wages payable, Sales revenue, Manufacturing overhead, Cost of goods sold, Salaries and wages expense, Advertising expenses, and Depreciation expense. | |||
| 1-Dec | Raw Materials purchased on account, $11,000. | |||
| 5-Dec | All Raw Materials needed for Job #1 were requisitioned from the material storage for use during the month. Assume all materials are direct. | |||
| 10-Dec | The following employee costs were incurred but not paid during the month: | |||
| Total cost incurred for direct labor for Job #1 Cost Sheet. | ||||
| Salary for supervisor of the factory $3,500. | ||||
| Administrative Salary $2,000. | ||||
| 15-Dec | All Raw Materials needed for Job #2 were requisitioned from the material storage for use during the month. Assume all materials are direct. | |||
| 16-Dec | Rent for the month of December for the factory building incurred but not paid $600. | |||
| 17-Dec | Advertising costs incurred but not paid for the month was $1,400. | |||
| 20-Dec | Depreciation for the month of December was recorded on equipment was $750 ($150 for equipment used in the factory and the remainder for equipment used in selling and administrative activities). | |||
| 22-Dec | Manufacturing overhead cost was applied based on direct labor hours to Job #1 based on the POHR determined on the "Job Cost Sheet". | |||
| 26-Dec | Job #1 was completed and transferred to Finished Goods during the month. | |||
| 28-Dec | The completed table from Job #1 was sold on account to the customer for $16,000 during the month. (Hint: Make sure to account for the cost of the table that was sold using the cost from the job cost sheet.) | |||
| 31-Dec | Direct labor cost incurred but not paid for three employees to start manufacturing Job #2. The employees only worked one hour each, three hours total during the month and they did not complete their work on the job. | |||
| 31-Dec | Manufacturing overhead cost was applied based on direct labor hours to Job #2 based on the POHR. Only three direct labor hours were worked on Job #2 during the month. | |||
| 31-Dec | Any underapplied or overapplied overhead for the month was closed out to Cost of Goods Sold. | |||
| Step 5 | Post the journal entries that you recorded on the "General Journal" tab to the "T-accounts" tab. This is the company's first month of business, so there will not be any beginning balances. Compute the balance for each T-account after all of the entries have been posted. | |||
| Step 6 | Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold on the "Schedule of COGM and COGS" tab for Job #1 and Job #2 that were worked on during the month by the company. Make sure to follow the format noted in your book (pg. 87). (Hint: This is the company's first month of operations and therefore the beginning balances will be zero.) | |||
| Step 7 | Prepare an Income Statement for the month using the Traditional Format on the "Income Statement" tab. | |||
| Step 8 | Answer the additional questions below | |||
| Check Figure: Cost of Goods Manufactured= $4,150 | ||||
| What is the ending balance for raw materials? | ||||
| What is the ending balance for work in process? | ||||
| What is the ending balance for finished goods? | ||||
| What is the actual manufacturing overhead cost incurred during December? | ||||
| What is the total applied manufacturing overhead cost during December? | ||||
| What is the unadjusted cost of goods sold? | ||||
| Was the manufacturing overhead for the month of December overapplied/underapplied ? | ||||
| What is the amount of Manufacturing overhead overapplied/underapplied? | ||||
| What is the adjusted cost of goods sold? | ||||
| What is gross margin? | ||||
| What is net operating income? | ||||
| What is the total prime cost for Job#1? | ||||
| What is the total conversion cost for job #1? | ||||
| What is the total product cost for job#1? | ||||
| What was the period cost incurred for the month of December? | ||||
| What is the contribution margin for Job #1 (assume that all selling and administrative cost and all manufacturing overhead costs are fixed.)? | ||||
| What would be the actual (not applied) total fixed manufacturing overhead cost incurred for the company for the month if the order in Job #1 is for five tables instead of one table assuming this cost is with in the relevant range? | ||||
