Question

Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates only to one customer's lean cell for the coming year. Projected labor and overhead, $2,865,800; materials costs, $35 per unit. Planned production included 5,152 hours to produce 16,100 motor drives. Actual production for August was 1,970 units, and motor drives shipped amounted to 1,480 units.

From the foregoing information, determine the production costs transferred to Cost of Goods Sold during August.

Answer 1

Given Information

Material cost = $35 per unit

Projected Labour and overhead cost = $2,865,800

Planned Production = 16,100 Units

Actual production for August = 1,970 units

Cost of goods sold = 1,480 units

Step 1

Labour and overhead cost per unit = Projected Labour and overhead cost/Projected Units =$2,865,500/16100

=$177.98

Step 2

Manufacturing cost per unit = Material Cost per unit + Labour and overhead cost per unit

=$35+$177.98

=$212.98

Step 3

Production Cost = Actual Production* Manufacturing cost per unit

=1970*$212.98

                           =$419,573

Step 4

Cost of Goods Sold = 1480*$212.98

                                  =$315,210.4/-

Production costs transferred to Cost of Goods Sold during August is $315,210.4/-

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