Question

In: Accounting

Cost Formulas Shorewood Manufacturing produces a single product requiring the following direct material and direct labor:...

Cost Formulas Shorewood Manufacturing produces a single product requiring the following direct material and direct labor:

Description | Cost per unit of Input | Required Amount per Unit of Product

Material A $8/pound 10 ounces

Materia B $5/pound 8 ounces

Material C 20/gallon 0.3 gallon

Cutting labor 9/hour 30 minutes

Shapping labor 11/hour 15 minutues

Finishing labor 12/hour 45 minutes

Manufacturing overhead consits of indirect material, $0.60 per unit of product; indirect labor, $1,000 per month plus $0.70 per unit of product; factory maintenance, $14,000 per year plus $0.55 per unit of product; factory depreciation, $15,000 per year; and annual factory property taxes, $8,000. Selling and administrative expenses include the salaries of a sales manager, $30,000 per year; an office manager, $18,000 per year; and two salespersons, each of whom is paid a base salary of $11,000 per year and a commission of $3 per unit sold. Advertising and promotion of the product are done through a year- round media package program costing $1,000 per week.

Required

a. Analyze all cost and expense factors to determine a general formula (based on units of production) for total cost.

b. Assuming a relevant range of 10,000 to 20,000 units, what is the estimated unit cost for producing and selling 10,000 units? 20,000 units? Explain the variation in unit cost at the two levels of production.

c. If 15,000 units are produced and sold in a year, what selling price results in a net income before income tax of $60,000?

Solutions

Expert Solution

The difference in the cost to produce and sell 10,000 units nad 20,000 units are due to variable costs as these costs changes according to the level of production.


Related Solutions

Cost Formulas Colonial Manufacturing produces a single product requiring the following direct material and direct labor:...
Cost Formulas Colonial Manufacturing produces a single product requiring the following direct material and direct labor: Cost per Unit of Input Required Amount per Unit of Product Material A $9 / pound 24 ounces Material B $6 / pound 12 ounces Material C $12 / gallon 0.5 gallon Cutting labor $10 / hour 45 minutes Shaping labor $12 / hour 15 minutes Finishing labor $11 / hour 30 minutes Manufacturing overhead consists of indirect materials, $0.80 per unit of product;...
Colonial Manufacturing produces a single product requiring the following direct material and direct labor: Cost per...
Colonial Manufacturing produces a single product requiring the following direct material and direct labor: Cost per Unit of Input Required Amount per Unit of Product Material A $9 / pound 24 ounces Material B $6 / pound 12 ounces Material C $12 / gallon 0.5 gallon Cutting labor $10 / hour 45 minutes Shaping labor $12 / hour 15 minutes Finishing labor $11 / hour 30 minutes Manufacturing overhead consists of indirect materials, $0.80 per unit of product; indirect labor,...
1. Bus, Inc. produces 2 products, A and B, each requiring direct material and labor.  Product A...
1. Bus, Inc. produces 2 products, A and B, each requiring direct material and labor.  Product A sells for $10 each and Product B sells for $15 each.  It takes workers 3 hours to make a unit of A and 1 hour to make a unit of B.  It takes 2 pounds of materials to make a unit of A and 4 pounds to make a unit of B.  Total labor available is 200 hours; total material available is 300 pounds.  The variable costs associated...
direct material (DM), direct labor (DL) and manufacturing overhead (MOH) are considered components of product cost...
direct material (DM), direct labor (DL) and manufacturing overhead (MOH) are considered components of product cost that eventually become part of inventory cost. Selling and administrative expenses are typically considered period costs that should be charged to expenses in the period in which those are incurred. Now, what happens if a period cost is incorrectly classified as a product cost, and vice versa? What is affected, and how does that matter? [think about where these costs eventually end up and...
Material and Labor Variances The following actual and standard cost data for direct material and direct...
Material and Labor Variances The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product: Actual Costs Standard Costs Direct material 4,200 lbs. @ $4.90 4,000 lbs. @ $5.20 Direct labor 5,700 hrs. @ $9.30 6,000 hrs. @ $9.50 Determine the following variances: Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable. Materials...
The following actual and standard cost data for direct material and direct labor relate to the...
The following actual and standard cost data for direct material and direct labor relate to the production of 2,000 units of a product: Actual Costs Standard Costs Direct material 21,450 lbs. @ $5.30 22,000 lbs. @ $5.10 Direct labor 34,100 hrs. @ $8.40 33,000 hrs. @ $8.70 Determine the following variances: Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable. Materials Variances Actual cost: $Answer...
Gold Corporation produces a single product and the standard labor cost of that product is 5...
Gold Corporation produces a single product and the standard labor cost of that product is 5 hours at a labor rate of $25 per hour. During the month of January, 50,000 hours of labor are incurred at a cost of $23 per hour to produce 9,850 units. Compute the labor price and quantity variance, as well as the total labor variance. In producing that product, the standard material cost for 1 unit is 10 pounds of direct materials at $3.50...
Determine whether each of the following costs should be classified as: Direct material Direct Labor Manufacturing...
Determine whether each of the following costs should be classified as: Direct material Direct Labor Manufacturing Overhead Period Cost Oils, glues, resins Answer 1 The factory janitor's salary Answer 2 Frames and tires used in manufacturing bicycles Answer 3 Wages paid to the workers assembling the bicycles for sale Answer 4 Depreciation of office computer system Answer 5 Wood purchased to manufacture tables made of wood. Answer 6 Depreciation on factory equipment Answer 7 The company spends $35,000 a year...
Rundle Manufacturing Company produces a single product. The following data apply to the standard cost of...
Rundle Manufacturing Company produces a single product. The following data apply to the standard cost of materials and labor associated with making the product: Materials quantity per unit 1 pound Materials price $ 6.10 per pound Labor quantity per unit 2 hours Labor price $ 10.10 per hour During the year, the company made 2,020 units of product. At the end of the year, the following variances had been calculated. Materials usage variance $ 1,159 Favorable Materials price variance $...
Glavine & Co. produces a single product, each unit of which requires three direct labor hours...
Glavine & Co. produces a single product, each unit of which requires three direct labor hours (DLHs). Practical capacity (for setting the factory overhead application rate) is 60,000 DLHs, on an annual basis. The information below pertains to the most recent year: Standard direct labor hours (DLHs) per unit produced 3.00 Practical capacity, in DLHs (per year) 60,000 Variable overhead efficiency variance $ 20,000 unfavorable (U) Actual production for the year 17,000 units Budgeted fixed manufacturing overhead $ 1,200,000 Standard...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT