Question

Required information [The following information applies to the questions displayed below.] Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $500 each. Costs 1. Plastic for casing-$17,000 2. Wages of assembly workers-$82,000 3. Property taxes on factory-$5,000 4. Accounting staff salaries-$35,000 5. Drum stands (1,000 stands purchased)-$26,000 6. Rent cost of equipment for sales staff-$10,000 7. Upper management salaries,$125,000 8. Annual flat fee for factory maintenance service-$10,000 9. Sales commissions-$15 per unit 10. Machinery depreciation, straight-line-$40,000 Required: 1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)

Answer 1

1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. Cost by Behavior Costs Variable Fixed 1 Plastic for casing 17,000 2 Wages of assembly workers 82,000 | 3 Property taxes on factory 5,000 | 4 Accounting staff salaries 35,000 5 Drum stands 26,000 6 Rent cost of equipment for sales staff 10,000 | 7 Upper management salaries 125,000 8 Annual flat fee for factory maintenance service 10,000 9 Sales commissions 15,000 10 Machinery depreciation, straight-line 40,000 Cost by Function Product Period 17,000 82,000 5,000 35,000 26,000 10,000 125,000 10,000 15,000 40,000

2. Compute the manufacturing cost per drum set. TrueBeat Calculation of Manufacturing Cost per Drum Set Item Total cost Per unit cost Variable production costs Plastic for casing Wages of assembly workers Drum stands $17,000 82,000 26,000 $17 82 - 26 125,000 125 Total variable production costs Fixed production costs Property taxes on factory Annual fee for maintenance service Machinery depreciation 5,000 10,000 40,000 Total fixed production costs Total production cost 55,000 $180,000 $180

Explanation: Sales commissions = ($15 per unit * 1,000 drum sets) Sales commissions = $15,000 Per unit cost = (Total cost / 1,000 drum sets) Plastic for casing: ($17,000 / 1,000 drum sets) = $17.00 Wages of assembly workers: ($82,000 / 1,000 drum sets) = $82.00 Drum stands: $26,000 / 1,000 drum sets) = $26.00 Property taxes on factory: ($5,000 / 1,000 drum sets) = $5.00 Annual fee for maintenance service: ($10,000 / 1,000 drum sets) = $10.00 Machinery depreciation: ($40,000 / 1,000 drum sets) = $40.00