Question

Problem 01-1A Cost computation, classification, and analysis LO C2, C3

Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $456 each.
  

	Costs
1.	Plastic for casing—$19,000
2.	Wages of assembly workers—$89,000
3.	Property taxes on factory—$7,000
4.	Accounting staff salaries—$30,000
5.	Drum stands (1,000 stands purchased)—$31,000
6.	Rent cost of equipment for sales staff—$24,000
7.	Upper management salaries—$155,000
8.	Annual flat fee for factory maintenance service—$13,000
9.	Sales commissions—$20 per unit
10.	Machinery depreciation, straight-line—$38,000

Problem 01-1A Part 1

Required:
1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)

Problem 01-1A Part 2

2. Compute the manufacturing cost per drum set.

Answer 1

1)

	Costs	Variable	Fixed	Product	Period
1	Plastic for casing	19000		19000
2	Wages of assembly workers	89000		89000
3	Property taxes on factory		7000	7000
4	Accounting staff salaries		30000		30000
5	Drum stands	31000		31000
6	Rent cost of equipment for sales staff		24000		24000
7	Upper management salaries		155000		155000

8	Annual flat fee		13000	13000
9	Sales commissions (20x1000)	20000			20000
10	Machinery depreciation		38000	38000

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2)

Item	Total cost	Per unit cost
Variable Production costs
Plastic for casing	19000	19
Wages of assembly workers	89000	89
Drum stands	31000	31
Total variable production costs	139000	139
Fixed production costs
Property taxes on factory	7000	7
Annual flat fee	13000	13
Machinery depreciation	38000	38
Total fixed production costs	58000	58
Total production costs	197000	197