Question

Worf 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. Purchase Cash paid for equipment, including sales tax of $5,000 $105,000 Freight and insurance cost while in transit 2,000 Cost of moving equipment into place at factory 3,100 Wage cost for technicians to test equipment 4,000 Insurance premium paid during first year of operation on this equipment 1,500 Special plumbing fixtures required for new equipment 8,000 Repair cost incurred in first year of operations related to this equipment 1,300 Construction Material and purchased parts (gross cost $200,000; failed to take 2% cash discount) $200,000 Imputed interest on funds used during construction (stock financing) 14,000 Labor costs 190,000 Allocated overhead costs (fixed-$20,000; variable-$30,000) 50,000 Profit on self-construction 30,000 Cost of installing equipment 4,400 Compute the total cost for each of these two pieces of equipment.

Answer 1

Total cost in Purchase equipment is $122,100

Total cost in Construction equipment is $440,400

Purchase cost		Construction cost
Cash paid for equipment, including sales tax	105,000	Material and purchased parts (200,000 x 0.98)	196,000
Freight and insurance cost while in transit	2,000	Imputed interest on funds used during construction	-
Cost of moving equipment into place at factory	3,100	Labor costs	190,000
Wage cost for technicians to test equipment	4,000	Overhead costs	50,000
Insurance paid during ist year of operation	-	Profit on self construction	-
Special plumbing fixtures for new equipment	8,000	Cost of installing equipment	4,400
Repair cost incurred in first year of operation	-
Total cost	$122,100	Total cost	$440,400