Question

Given below is a list of costs:

Direct labor                                                                 35,500

Accounting Dept. salaries                                          70,000

Indirect materials                                                        32,700

Depreciation, factory                                                  15,000

Direct materials                                                          66,000

Sales commission                                                       36,000

Indirect labor                                                              20,200

Advertising                                                                 5,800

Water and electricity of the office                              12,000

Required,

From the above costs calculate the following costs (show your calculation):

1. Total product costs
2. Total period costs
3. Total prime costs
4. Total conversion costs

Answer 1

Ans-

Total product cost= Direct materials+ Direct labour+ Factory overheads

Direct Materials  = 66,000

Direct Labour = 35,500

Factory overheads= Indirect mat+Dep factory+Indirect labour

= 32,700+15,000+20,200= 67,900

= 66,000+35,500+67900

Total product cost= 1,69,400

Total Period cost= Expenses are incurred , or all the cost which are not product cost

Account dept salaries+sales commission+ Advertising exp+water and electricity of office

= 70,000+36,000+5800+12,000 = 123,800

Prime cost= Direct Materials+ Direct Labour+ Direct expenses

= 66,000+35,500+0 = 101500

Prime cost= 101,500

Conversion cost= cost of production which will include all expenses upto production cost

Prime cost= 101,500

other cost = Account dept salaries+ Indirect mat+ indirect labour+ dep factory+water and electricity of office

= 70,000+32,700+15,000+20,200+12,000

= 149,900

conversion cost = 101,500+149,900 = 251,400