Question

Your friend, Suzie Whitson, has designed a new type of outdoor toy that helps children learn basic concepts such as colors, numbers, and shapes. Suzie’s product will target two groups: day care centers in warm climates and home school programs. Her company is Jiffy Jet and costs for last month follow:

Factory rent	$	3,100
Company advertising		1,180
Wages paid to assembly workers		30,500
Depreciation for salespersons’ vehicles		2,180
Screws		585
Utilities for factory		810
Assembly supervisor’s salary		3,630
Sandpaper		150
President’s salary		5,180
Plastic tubing		4,050
Paint		285
Sales commissions		1,220
Factory insurance		1,090
Depreciation on cutting machines		2,090
Wages paid to painters		7,900

Assume that Suzie Whitson has decided to begin production of her outdoor children’s toy.

Required:
1 and 2. Identify each of the preceding costs as either a product or a period cost. If the cost is a product cost, decide whether it is for direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and also identify each of the preceding costs as variable or fixed cost.

3. Determine the total cost for each of the following:

Answer 1

Factory rent				product	MOH
Company advertising				period	NA
Wages paid to assembly workers				product	DL
Depreciation for salespersons vechicles				period	NA
Screws				product	MOH
Utilities for factory				product	MOH
Assembly supervisors salary				product	MOH
Sandpaper				product	MOH
President's salary				period	NA
Plastic tubing				product	DM
Paint				product	MOH
Sales commission				period	NA
Factory insurance				product	MOH
Depreciation on cutting machines				product	MOH
Wages paid to painters				product	DL
a)	Direct Materials
	Plastic tubing				4,050
	Direct Materials				4,050	answer
b)	Direct labor
	Wages paid to assembly workers				30,500
	Wages paid to painters				7,900
	Direct labor				38,400
c)	Manufacturing overhead
	Factory rent				3,100
	Screws				585
	Utilities for factory				810
	Assembly supervisors salary				3,630
	Sandpaper				150
	Paint				285
	Factory insurance				1,090
	Depreciation on cutting machines				2,090
	Manufacturing overhead				11,740	answer
d)	Prime cost				42,450
e)	Conversion cost				50,140
f)	Total product cost				54,190
g)	Total period cost
	Company advertising				1,180
	Depreciation for salespersons vechicles				2,180
	President's salary				5,180
	Sales commission				1,220
	Total period cost				9,760
h)	total variable cost
	Company advertising				1,180
	Wages paid to assembly workers				30,500
	Screws				585
	Utilities for factory				810
	Sandpaper				150
	Plastic tubing				4,050
	Paint				285
	Sales commission				1,220
	Wages paid to painters				7,900
	total variable cost				46,680	Answer
i)	total fixed cost
	Factory rent				3,100
	Depreciation for salespersons vechicles				2,180
	Assembly supervisors salary				3,630
	President's salary				5,180
	Factory insurance				1,090
	Depreciation on cutting machines				2,090
	total fixed cost				17,270	Answer