Question

To automate one of its production​ processes, the Milwaukee Corporation bought four flexible manufacturing cells at a price of ​$460,000 each. When they were​ delivered, Milwaukee paid freight charges of ​$18,000 and handling fees of ​$12,000. Site preparation for these cells cost ​$42,000. Seven ​foremen, each earning ​$19 an​ hour, worked five​ 40-hour weeks to set up and test the manufacturing cells. Special wiring and other materials applicable to the new manufacturing cells cost ​$3,500. Determine the cost basis​ (amount to be​ capitalized) for these cells.

The cost basis for these cells is ​$_____. ​(Round to the nearest​ dollar.)

Answer 1

Solution :

Purchase cost of three flexible manufacturing cells at a price of $ 4,60,000 each

= 4* 4,60,000 = $1840,000

Paid freight charges = $ 18,000

Handling Fee = +   $12,000

Site preparation for these cells = + $ 42,000

Seven ​foremen, each earning ​$19 an​ hour, worked five​ 40-hour weeks

Seven foreman each working 40 hours for 19 week = 7*5*40*19 = $26,600

Special wiring and other materials applicable to the new manufacturing cells cost ​$3,500

Adding up all of theses to get the total cost to be capitalized = 1840,000+18000+12000+42000+26600+3500

= 19,42,100