Question

Ohno Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Ohno’s monthly manufacturing cost and other expense data are as follows.

Rent on factory equipment		$11,400
Insurance on factory building		2,400
Raw materials (plastics, polystyrene, etc.)		78,000
Utility costs for factory		900
Supplies for general office		400
Wages for assembly line workers		63,400
Depreciation on office equipment		800
Miscellaneous materials (glue, thread, etc.)		1,400
Factory manager’s salary		6,600
Property taxes on factory building		500
Advertising for helmets		14,400
Sales commissions		11,000
Depreciation on factory building		1,700

Enter each cost item on your answer sheet, placing the dollar amount 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
Rent on factory equipment		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Insurance on factory building		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Raw materials		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Utility costs for factory		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Supplies for general office		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Wages for assembly line workers		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Depreciation on office equipment		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Miscellaneous materials		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Factory manager’s salary		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Property taxes on factory building		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Advertising for helmets		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Sales commissions		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
Depreciation on factory building		enter a dollar amount		enter a dollar amount		enter a dollar amount		enter a dollar amount
		$enter a total amount for this column		$enter a total amount for this column		$enter a total amount for this column		$enter a total amount for this column

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Compute the cost to produce one helmet. (Round answer to 2 decimal places, e.g. 15.25.)

Production cost per helmet

$enter production cost per helmet in dollars rounded to 2 decimal places

Answer 1

Solution ;

                                Product costs

Cost item	Direct material	Direct labour	Manufacturing O.H
Rent on factory equipment			$11400
Insurance on factory building			$2400
Raw materials	78000
Utility Costs for factory			900
Supplies for general office			400
Wages for assembly line workers		63400
Depreciation on office equipment			800
Miscellaneous material	1400
Factory manager's salary			6600
Property tax on factory building			500
Advertising for helmets			14400
Sales commissions			11000
Depreciation on factory building			17000
Total	79400	63400	65400

Total cost = Direct material + Direct labour + Manufacturing O.H

                = 79400 + 63400 + 65400

                = 208200

As $208200is the cost to produce 10,000 helmets.

Production cost per helmet = 208200 / 10,000

                                        = $ 20.82