Question

The following cost data for the year just ended pertain to Sentiments, Inc., a greeting card manufacturer:

Direct material	$	2,200,000
Advertising expense		99,000
Depreciation on factory building		116,000
Direct labor: wages		465,000
Cost of finished goods inventory at year-end		115,000
Indirect labor: wages		141,000
Production supervisor’s salary		46,000
Service department costs*		100,000
Direct labor: fringe benefits		120,000
Indirect labor: fringe benefits		32,000
Fringe benefits for production supervisor		11,000
Total overtime premiums paid		55,000
Cost of idle time: production employees§		40,000
Administrative costs		150,000
Rental of office space for sales personnel†		15,000
Sales commissions		6,000
Product promotion costs		10,000

*All services are provided to manufacturing departments.

§Cost of idle time is an overhead item; it is not included in the direct-labor wages given above.

†The rental of sales space was made necessary when the sales offices were converted to storage space for raw material.

Required:
1. Compute each of the following costs for the year just ended

a.Total prime costs

b.Total manufacturing overhead costs

c.Total conversion costs

d.Total product costs

e.Total period costs

Answer 1

a)	Calculate Prime Cost
	Particulars	Amount
	Direct materials used	2200000
	Direct labor: wages	465000
	Direct labor: Fringe benefits	120000
	Total Prime costs	2785000
b)	Total manufacturig overhead costs
	Indirect labor : Fringe benefit	32000
	Fringe benefits for production supervisor	11000
	Total overtime premiums paid	55000
	cost of idle time: production employees	40000
	Depreciation on factory building	116000
	indirect labor : wages	141000
	product supervisors salary	46000
	Service department costs	100000
	Total manufacturig overhead costs	541000
c)	Conversion costs
	Direct labor	585000
	manufacturing overhead	541000
	Total conversion cost	1126000
d)	Total product costs
	Direct materials	2200000
	Direct labor	585000
	manufacturing overhead	541000
	Total production cost	3326000
e)	Total period costs
	Administrative costs	150000
	Rental office space for sales personnel	15000
	Sales commission	6000
	product promotion costs	10000
	advertising expenses	99000
	Total period costs	280000