Question

Problem 1-24 Different Cost Classifications for Different Purposes [LO1-1, LO1-2, LO1-3, LO1-4, LO1-5]

Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for the month:

Direct materials				$	87,000
Direct labor				$	44,000
Variable manufacturing overhead	$	22,200
Fixed manufacturing overhead		33,400
Total manufacturing overhead				$	55,600
Variable selling expense	$	15,600
Fixed selling expense		25,200
Total selling expense				$	40,800
Variable administrative expense	$	5,800
Fixed administrative expense		28,600
Total administrative expense				$	34,400

Required:

1. With respect to cost classifications for preparing financial statements:

a. What is the total product cost?

b. What is the total period cost?

2. With respect to cost classifications for assigning costs to cost objects:

a. What is total direct manufacturing cost?

b. What is the total indirect manufacturing cost?

3. With respect to cost classifications for manufacturers:

a. What is the total manufacturing cost?

b. What is the total nonmanufacturing cost?

c. What is the total conversion cost and prime cost?

4. With respect to cost classifications for predicting cost behavior:

a. What is the total variable manufacturing cost?

b. What is the total fixed cost for the company as a whole?

c. What is the variable cost per unit produced and sold?

5. With respect to cost classifications for decision making:

a. If Dozier had produced 1,001 units instead of 1,000 units, how much incremental manufacturing cost would it have incurred to make the additional unit?

Answer 1

Dozier Company

1a. determination of total product cost:

Total product cost –

Direct material$87,000

Direct labor$44,000

Total manufacturing overhead$55,600

Total product cost$186,600

1b. Determination of total period cost –

Total period cost –

Total selling expense$40,800

Total administrative expense$34,400

Total period cost$75,200

2a. Determination of Total direct manufacturing cost:

Total direct manufacturing costs –

Direct materials $87,000

Direct labor$44,000

Total manufacturing cost$131,000

2b. Determination of total indirect manufacturing cost:

Variable manufacturing overhead$22,200

Fixed manufacturing overhead$33,400

Total indirect manufacturing overhead$55,600

3a. determination of total manufacturing cost:

Direct material$87,000

Direct labor$44,000

Total Manufacturing overhead$55,600

Total manufacturing cost$186,600

3b. total non-manufacturing cost:

Total selling expense$40,800

Total administrative expense $34,400

Total non-manufacturing cost $75,200

3c. Total conversion cost and prime cost:

Total conversion cost –

Direct labor$44,000

Total manufacturing overhead$55,600

Total conversion cost$99,600

Prime cost –

Direct materials$87,000

Direct labor$44,000

Prime cost$131,000

4a. Total variable manufacturing cost:

Direct materials$87,000

Direct labor$44,000

Variable manufacturing OH$22,200

Total variable manufacturing cost = $153,200

4b. Total fixed cost for the company as a whole:

Fixed manufacturing overhead$33,400

Fixed selling expense$25,200

Fixed administrative expense$28,600

Total fixed cost for the company as a whole = $87,200

4c. determination of variable cost per unit produced and sold:

Direct materials $87,000

Direct labor$44,000

Variable MOH$22,200

Variable selling expense$15,600

Variable Admin expense$5,800

Total variable cost to produce and sell 1,000 units = $174,600

Total variable cost per unit produced and sold = 174,600/1,000 = $174.60

5a. Determination of the incremental manufacturing cost needed to make the additional unit:

Direct materials $87,000

Direct labor$44,000

Variable MOH$22,200

Total $153,200

Number of units1,000

Incremental cost per unit = $153,200/1,000 = $153.20

Hence, the company would incur an incremental cost $153.20 per unit to produce the additional unit.