Question

Various cost and sales data for Medco Inc. are given for the just-completed year:

Purchases of raw materials	$	174,500
Raw materials inventory, beginning		17,600
Raw materials inventory, ending		26,500
Depreciation, factory		86,400
Insurance, factory		6,900
Direct labor		73,300
Maintenance, factory		37,600
Administrative expenses		85,200
Sales		739,000
Utilities, factory		36,500
Supplies, factory		1,190
Selling expenses		97,100
Indirect labor		78,300
Work in process inventory, beginning		7,950
Work in process inventory, ending		33,800
Finished goods inventory, beginning		12,850
Finished goods inventory, ending		51,400

1) Assume that the company expects to produce 24,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For factory depreciation? (In preparing your answer, assume that direct materials is a variable cost and that depreciation is a fixed cost; also assume that depreciation is computed on a straight-line basis.)

	The average cost per unit	Total cost
Direct Materials
Depreciation	$3.60	$86,400

2) Assuming the information given in the problem relates to the production of 30,000 fully and partially finished units during the year and that 6,000 of those units remain unsold, determine the cost components of the finished goods inventory.

Direct Materials
Direct Labor
Manufacturing overhead
Total

Answer 1

Schedule of Cost of Good Manufactured:

Direct Materials: $ $

Raw materials inventory beginning 17600

Add: Purchase of raw materials 174500

Raw materials available for use 192100

Deduct:Raw materials inventory ending   26500

Raw material used in production 1,65,600

Direct labour 73,300

Manufacturing Overhead:

Depreciation,Factory 86,400

Insurance, Factory 6,900

Indirect labor   78,300

Utilities, Factory 36,500

Supplies, Factory 1,190

Maintenance, Factory 37,600

Total Overhead cost 2,46,890
Total manufacturing cost    4,85,790

Add: Work in progress inventory beginning 7,950

    4,93,740

Deduct: Work in progress inventory ending   33,800

Cost of Goods Manufactured 4,59,940   Schedule of Cost Goods Sold :

Finished goods inventory,beginning       12,850 Add:Cost of goods manufactured 4,59,940

Goods available for Sale 4,72,790

Deduct: Finished goods inventory,ending   51,400

Cost of goods manufactured 4,21,390

Average cost per unit= Total cost of production/units produced

= 1,65,600/24,000

=6.9 or 7