Question

In: Accounting

Dozier Company produced and sold 1,000 units during its first month of operations. It reported the...

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 $ 74,000
Direct labor $ 37,500
Variable manufacturing overhead $ 17,000
Fixed manufacturing overhead 29,500
Total manufacturing overhead $ 46,500
Variable selling expense $ 13,000
Fixed selling expense 20,000
Total selling expense $ 33,000
Variable administrative expense $ 4,500
Fixed administrative expense 26,000
Total administrative expense $

30,500

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?

Solutions

Expert Solution

a. Calculation of total Manufacturing Cost or Product Cost:

Manufacturing Cost = Direct Material + Direct Labor + Manufacturing Overhead

Total Manufacturing Cost = $74,000 + $37,500 + $46,500 = $158,000

b. Calculation of Total Non-Manufacturing cost

Non-manufacturing costs refer to those incurred outside the factory or production department. These are costs are not needed in transforming materials into finished goods. Non-manufacturing costs include: selling expenses and general expenses.

Therefore.

Non-Mnufacturing Cost = Selling expenses + General and Administrative Expenses

Total Non- Manufacturing Cost = $33,000 + $30,500 = $63,500

c. Calcultion of total conversion cost and prime cost

Total Conversion Cost : Conversion costs are the manufacturing costs needed to convert the direct materials into products.

Total Conversion Cost = Direct Labor Cost + Manufacturig or Factory Overhead Cost

Direct Labor Cost = $37,500

Factory Overhead Cost = Variable manufacturing overhead + Fixed manufacturing overhead

Factory Overhead Cost = $17,000 + $29,500 = $46,500

Therefore,

Total Conversion Cost = Direct Labor Cost + Manufacturig or Factory Overhead Cost

Total Conversion Cost = $37,500 + $46,500 = $84,000

Prime Cost: Prime cost is the direct cost of manufacturing an item. Prime cost includes Direct Material and Direct Labor.

Prime Cost = Direct Material + Direct Labor = $74,000 + $37,500 = $111,500


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