Question
In: Accounting
Different Cost Classifications for Different Purposes
Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for the month
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?
Solutions
Expert Solution
1a. The total product cost is computed as follows:
Direct materials................................................. $ 69,000
Direct labor....................................................... 35,000
Total manufacturing overhead ............................ 43,000
Total product cost.............................................. $147,000
1b. The total period cost is computed as follows:
Total selling expense ......................................... $30,000
Total administrative expense .............................. 29,000
Total period cost................................................ $59,000
2a. The total direct manufacturing cost is computed as follows:
Direct materials ................................................. $ 69,000
Direct labor....................................................... 35,000
Total direct manufacturing cost .......................... $104,000
2b. The total indirect manufacturing cost is computed as follows:
Variable manufacturing overhead ....................... $15,000
Fixed manufacturing overhead ........................... 28,000
Total indirect manufacturing cost........................ $43,000
3a. The total manufacturing cost is computed as follows:
Direct materials................................................. $ 69,000
Direct labor....................................................... 35,000
Total manufacturing overhead ............................ 43,000
Total manufacturing cost.................................... $147,000
3b. The total nonmanufacturing cost is computed as follows:
Total selling expense ......................................... $30,000
Total administrative expense .............................. 29,000
Total nonmanufacturing cost .............................. $59,000
3c. The total conversion cost is computed as follows:
Direct labor....................................................... $35,000
Total manufacturing overhead ............................ 43,000
Total conversion cost ......................................... $78,000
The total prime cost is computed as follows:
Direct materials................................................. $ 69,000
Direct labor....................................................... 35,000
Total prime cost................................................. $104,000
4a. The total variable manufacturing cost is computed as follows:
Direct materials................................................. $ 69,000
Direct labor....................................................... 35,000
Variable manufacturing overhead ....................... 15,000
Total variable manufacturing cost ....................... $119,000
4b. The total amount of fixed cost for the company as a whole is computed as follows:
Fixed manufacturing overhead ........................... $28,000
Fixed selling expense......................................... 18,000
Fixed administrative expense.............................. 25,000
Total fixed cost.................................................. $71,000
4c. The variable cost per unit produced and sold is computed as follows:
Direct materials................................................. $ 69,000
Direct labor....................................................... 35,000
Total variable manufacturing overhead................ 15,000
Variable selling expense..................................... 12,000
Variable administrative expense.......................... 4,000
Total variable cost (a) ........................................ $135,000
Number of units produced and sold (b)............... 1,000
Variable cost per unit produced and sold (a) ÷ (b)................................................................. $135
5a. The incremental manufacturing cost is computed as follows:
Direct materials ................................................. $ 69,000
Direct labor....................................................... 35,000
Variable manufacturing overhead ....................... 15,000
Total incremental cost (a) .................................. $119,000
Number of units produced and sold (b)............... 1,000
Incremental cost per unit produced (a) ÷ (b)...... $119
1a.Total period cost................................................ $59,000
2a. Total direct manufacturing cost .......................... $104,000
2b. Total indirect manufacturing cost........................ $43,000
3a. Total manufacturing cost.................................... $147,000
3b. Total nonmanufacturing cost .............................. $59,000
3c. Total conversion cost ......................................... $78,000
Total prime cost................................................. $104,000
4a. Total variable manufacturing cost ....................... $119,000
4b. Total fixed cost.................................................. $71,000
4c. Variable cost per unit produced and sold.............................. $135
5a. Incremental cost per unit produced .................... $119
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