Question

Question 1 Ontario Manufacturing company provided the following details about operations in September: Purchase of raw material 130,000 Maintenance, factory 40,000 Direct Labour 35,000 Rent, factory building 25,000 Selling and Administration salaries 44,200 Utilities, Factory 29,000 Sales commissions 25,500 Insurance, factory equipment 7,000 Depreciation, dales equipment 25,500 Advertising expenses 110,200 Depreciation, factory equipment ? The company also provided details regarding the balances in the inventory accounts at the beginning and end of the month as follows: Inventories Beginning of the month End of the month Raw materials 40,000 ? Work in progress 30,000 ? Finished goods 25,000 ? Raw materials used in production cost $150,000 from which 10% was considered indirect materials, total overhead costs for the year was $175,000, the goods available for sale totalled $360,000, and the cost of goods sold totalled $340,500. Required: 1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company's income statement for the year. 2. Assume that the dollar amounts given above are for the equivalent of 15,000 units produced during the year. Compute the average cost per unit for direct materials used, and compute the average cost per unit for rent on the factory building. 3. Assume that in the following year the company expects to produce 20,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials, and for rent on the factory building? Direct Materials are a variable cost and rent is a fixed cost. 4. As a manager in charge of production costs, explain to the president the reason for any difference in the average costs per unit between (2) and (3) above.

Answer 1