Question

Sheehan Brothers, Inc. produced and sold 1,000 units during it first month of operations. It reported the following costs and expenses for the month:

Direct materials		$86,000
Direct labor		$43,500
Variable manufacturing overhead	$21,800
Fixed manufacturing overhead	$33,100
Total manufacturing overhead		$54,900
Variable selling expense	$15,400
Fixed selling expense	$24,800
Total selling expense		$40,200
Variable administrative expense	$5,700
Fixed administrative expense	$28,400
Total administrative expense		$34,100

Required: Read each question carefully and compute the answers to each. Enter your answer using whole dollar amounts, commas if needed, no decimals and no dollar signs.

• With respect to cost classifications for preparing financial statements:

1. • What is the total product cost?
   • What is the total period cost?  

• With respect to cost classifications for assigning costs to cost objects:
  • What is total direct manufacturing cost?  
  • What is the total indirect manufacturing cost?  

• With respect to cost classifications for manufacturers:
  • What is the total manufacturing cost?  
  • What is the total nonmanufacturing cost?  

• What is the total variable manufacturing cost for the company as a whole?

• What is the total fixed cost for the company as a whole?

• What is the variable cost per unit produced and sold?

• With respect to cost classifications for decision making:
  • If Sheehan had produced 1,001 units instead of 1,000 units, how much incremental manufacturing cost would it have incurred to make the additional unit?

Answer 1

1) What is the total product cost?

product cost means costs that are incurred to create a product.

so from the above product cost are direct material, direct labour, variable and fixed manufacturing costs

ie, 86000+ 43500 + 21800+ 33100

so total product cost = 184400

2) What is the total period cost?

period cost are costs that are not related to manufacturing but relates to period ie, time. they are expensed on income statement in the period in which they are incurred.

from the above question period cost are variable and fixed selling expense, variable and fixed administrative expenses . these costs are period costs because they are not related to production of product.

so total period cost = 15400+24800+5700+28400

= 74300

3) What is total direct manufacturing cost?

from the above direct material and direct labour are only direct manufacturing cost

total direct manufacturing cost = 86000 + 43500 = 129500

4) What is the total indirect manufacturing cost?

from the above variable and fixed manufacturing overhead costs are indirect manufacturing cost

=21800+33100

=54900

5) What is the total manufacturing cost?

total manufacturing costs means total cost which are included in producing a product.

total manufacturing costs includes direct material, direct labour, variable and fixed manufacturing costs

ie, 86000+ 43500 + 21800+ 33100

so total manufacturing costs = 184400

6) What is the total non manufacturing cost?  

These are costs are not needed in transforming materials into finished goods.

so non manufacturing cost include variable and fixed selling expense, variable and fixed administrative expenses

so total non manufaturing cost = 15400+24800+5700+28400

=74300

7) What is the total variable manufacturing cost for the company as a whole?

variable costs are costs which vary according to quantity produced.

variable manufacturing costs are costs included in manufacturing a product which varies through production units.

variable manufacturing costs include

direct material, direct labour, variable manufacturing cost

= 86000+43500+21800

=151300

8) What is the total fixed cost for the company as a whole?

fixed costs are costs which are fixed they donot change according to production they are fixed.

total fixed cost for the company includes Fixed manufacturing overhead, Fixed selling expense, Fixed administrative expense

=33100+24800+28400

=86300

9) What is the variable cost per unit produced and sold?

variable costs are costs which vary according to quantity produced.

here we are considering variable cost as a whole that is both manufacturing and non manufacturing variable costs.

total variable costs include direct material, direct labour, Variable manufacturing overhead,Variable selling expense,Variable administrative expense

total variable cost = 86000+43500+21800+15400+5700

=172400

variable cost per units produced and sold = total variable cost / number of units produced and sold

number of units produced and sold= 1000

variable cost per units produced and sold= 172400/1000

=172.4

10) If Sheehan had produced 1,001 units instead of 1,000 units, how much incremental manufacturing cost would it have incurred to make the additional unit?

total manufacturing costs for 1000 units = 184400

in this there is both variable and fixed costs fixed cost doesnot change according to change in production but variable cost does

the fixed manufacturing cost = 33100

variabel manufacturing cost =

variable manufacturing cost

= 86000+43500+21800

=151300

variable manufacturing cost per unit = 151300/1000

= 151.3

variable manufacturing cost for 1001 units = 151.3 *1001 = 151451.3

total manufacturing cost for 1001 units = 151451.3+33100

=184551.3

incremental manufacturing cost = total manufacturing cost for 1001 units - total manufacturing cost for 1000 units

= total manufacturing costs for 1000 units =184400

incremental manufacturing cost =184551.3 - 184400

=151.3