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

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

Direct material $ 2,200,000
Advertising expense 98,000
Depreciation on factory building 115,000
Direct labor: wages 535,000
Cost of finished goods inventory at year-end 115,000
Indirect labor: wages 142,000
Production supervisor’s salary 47,000
Service department costs* 100,000
Direct labor: fringe benefits 99,000
Indirect labor: fringe benefits 30,000
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.

Compute each of the following costs for the year just ended

a.Total prime cost

Total manufacturing overhead costs

Total conversion costs

Total product costs

Total period costs


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Expert Solution

a) Total Primecost:

Direct materials : $ 2200000

Direct Labour:

Wages $535000

Fringe benifits $ 99000 634000

$ 2854000   

Total Manufacturing Overheads:

Depreciation on Factory building $ 115000

Indirect labour :

Wages : $ 142000

Fringe benifits : $ 30000 $172000

Production Supervisor Salary $ 47000

Frinde benifits for production supervisor $11000

Cost of Idle time $40000

Cost of Overtime time paid $55000

Service department costs $100000

$ 540000

Total Conversion Costs :

Total Conversion costs = Direct labourcosts + Manufacturing overheads

= $ 634000 + 540000

= $ 1174000

Total product cost:

Total product cost = Primecost + Manufacturing overhead cost

= $2854000 + $ 540000

= $ 3394000

Total period costs:

Administrative Costs $ 155000

Sales commision $ 6000

Product promotion $10000

Advertisement expenses $98000

Rental of office space $15000

$284000

Notes :

1) it is assumed that fringe benifites provided to the directlabour are part of directlabour cost and indirect labour and benifits provided to them are treated as Overhead cost

2) Conversional costs are those that are incured for converting raw material into finished goods.As a result conversion costs include labour and Manufacturiong overheads

ekkarill92 answered 1 year ago
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