Question

E2-21A Classify and calculate a manufacturer's costs (Learning Objectives 2 & 4) An airline manufacturer incurred the following costs last month (in thousands of dollars): b. Production supervisors' salaries.... c. Depreciation on forklifts in factory d. Machine lubricants $ 35 f. As sembly workers' wages 620 $ 30 $ 120 260 S 10 $ 60 $ 170 g. Property tax on corporate marketing offic......... i. Cost of warranty repairs j. Machine operators' health insurance.. k. Depreciation on administrative offices I. Cost of designing new plant layout $1,400 Requirements Assuming the cost object is an airplane, classify each cost as one of the following: direct material (DM), direct labor (DL), indirect labor (IL), indirect materials (IM), other manufacturing overhea type of cost.) What is the total for each type of cost? 1. d (other MOH), or period cost. (Hint: Set up a column for each 2. Calculate total manufacturing overhead costs. 3. Calculate total product costs. 4. Calculate total prime costs. 5. Calculate total conversion costs 6. Calculate total period costs.

Answer 1

REQUIREMENT 1. CLASSIFICATION OF COST (SHOWING TOTAL OF EACH TYPE OF COST)

TYPE DIRECT MATERIAL DIRECT LABOR INDIRECT MATERIAL INDIRECT LABOR OTHER MANUFACTURING OVERHEADS PERIOD COST a. airplane seats $240 b. production supervisors salaries $100 c. depreciation on forklifts in factory $40 d. machine lubricants $35 e. factory janitors wages $15 f. assembly workers wages $620 g. property tax on corporate marketing offices $30 h. plant utilities $120 i. cost of warranty repairs $260 j. machine operators health insurance $10 k. depreciation on administrative offices $60 l. cost of designing new plant layout $170 m. jet engines $1400 TOTAL (of each type of cost) $1640 $630 $35 $115 $160 $520

I

                                                 

REQUIREMENT 2.

TOTAL MANUFACTURING COST = INDIRECT MATERIAL + INDIRECT LABOR + OTHER                              MANUFACTURING OVERHEADS

                                                                                        

                                                                                       = $ 35 + $115 + $ 160 =   $310*

                                                               REQUIREMENT 3.

TOTAL PRODUCT OST =      DIRECT MATERIAL + DIRECT LABOR + TOTAL MANUFACTURING OVERHEAD COST

                                                           $1640 + $630 + $310* =     $2580

                                                            REQUIREMENT 4.

       TOTAL PRIME COST =    DIRECT MATERIAL +   DIRECT LABOR

                                                   $1640   + $ 630    =   $2270

                                                             REQUIREMENT 5.

TOTAL CONVERSION COST =    DIRECT LABOR +   TOTAL MANUFACTURING OVERHEAD COST  

                                                               $630    +   $310*   =   $940

                         

                                                           REQUIREMENT 6.

TOTAL PERIOD COST =     $520 ( AS SHOWN IN THE   TABLE )