Question

Bell Company, a manufacturer of audio systems, started its production in October 2017. 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 $ 75 per unit. Workers on the production lines are on average paid $ 13 per hour. An audio system usually takes  7 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $ 5,390 per month. Indirect materials cost $ 7 per system. A supervisor was hired to oversee production; her monthly salary is $3,210.

Factory janitorial costs are $ 2,250 monthly. Advertising costs for the audio system will be $ 9,120 per month. The factory building depreciation expense is $ 6,960 per year. Property taxes on the factory building will be $ 8,520 per year.

Assuming that Bell manufactures, on average,  1,420 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.

		Product Costs
Cost Item		Direct Materials		Direct Labor		Manufacturing Overhead		Period Costs
Raw materials		$		$		$		$
Wages for workers
Rent on equipment
Indirect materials
Factory supervisor’s salary
Janitorial costs
Advertising
Depreciation on factory building
Property taxes on factory building
		$		$		$		$

Answer 1

	Product costs			Period costs
	Direct Materials	Direct Labor	Manufacturing Overhead
Raw materials	106500
Wages for workers		129220
Rent on equipment			5390
Indirect materials			9940
Factory supervisor’s salary			3210
Janitorial costs			2250
Advertising				9120
Depreciation on factory building			580
Property taxes on factory building			710
Total	106500	129220	22080	9120
Workings:
Raw materials = 1420*75 = $106500
Wages for workers = 1420*7*13 = $129220
Depreciation on factory building = 6960/12 = $580
Property taxes on factory building = 8520/12 = $710