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 $77 per unit. Workers on the production lines are on average paid $14 per hour. An audio system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $5,970 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,960.

Factory janitorial costs are $1,820 monthly. Advertising costs for the audio system will be $9,230 per month. The factory building depreciation expense is $6,360 per year. Property taxes on the factory building will be $9,480 per year.

(a)

Assuming that Bell manufactures, on average, 1,530 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
	Direct Materials	Direct Labor	Manufacturing Overhead	Period Costs
Raw materials	117810
Wages for workers		107100
Rent on equipment			5970
Indirect materials			7650
Factory supervisor’s salary			3960
Janitorial costs			1820
Advertising				9230
Depreciation on factory building			530
Property taxes on factory building			790
	117810	107100	20720	9230
Workings:
Raw materials	=1530*77
Wages for workers	=1530*14*5
Indirect materials	=1530*5
Depreciation on factory building	=6360/12
Property taxes on factory building	=9480/12