Question

Noteworthy, Inc., produces and sells small electronic keyboards. Assume that you have the following information about Noteworthy’s costs for the most recent month.

Depreciation on factory equipment	$	870
Depreciation on CEO's company car		170
Speakers used in the keyboard		1,300
Production supervisor's salary		2,310
Glue and screws used in the keyboards		270
Wages of persons who install the speakers		2,840
Cost to run an ad on local radio stations		695
Utilities for the factory		1,340
Personnel manager's salary		2,550
Wages of person who attaches legs to keyboards		2,050

Required:

1. Calculate the total product cost for Noteworthy.

2. Calculate the prime cost for Noteworthy.

3. Calculate the manufacturing overhead for Noteworthy.

4. Calculate the direct labor for Noteworthy.

5. Calculate the conversion cost for Noteworthy.

6. Calculate the total variable cost (with number of units produced as the activity) for Noteworthy.

7. Calculate the total fixed cost (with number of units produced as the activity) for Noteworthy.

Answer 1

1) Product costs = Depreciation on factory equipment+Speakers used in the keyboard+Production supervisor's salary+Glue and screws used in the keyboards+Wages of persons who install the speakers+Utilities for the factory+Wages of person who attaches legs to keyboards+Cost to run an ad on local radio stations+Personnel manager's salary

=870+1300+2310+270+2840+1340+2050+695+2550

=14225$

2)Prime costs=Direct materials+Direct labour

=Speakers used in the keyboard+Cost to run an ad on local radio stations + Wages of person who attaches legs to keyboards+Wages of persons who install the speakers

=1300+695+2050+2840

=6885$

3)Manufacturing overhead=Depreciation on factory equipment+Production supervisor's salary+Utilities for the factory+Personnel manager's salary+Glue and screws used in the keyboards

=870+2310+1340+2550+270

=7340$

4) Direct labour=Wages of person who attaches legs to keyboards+Wages of persons who install the speakers

=2050+2840

=4890$

5)Conversion costs=Wages of person who attaches legs to keyboards+Wages of persons who install the speakers+Depreciation on factory equipment+Utilities for the factory+Glue and screws used in the keyboards+Production supervisor's salary+Personnel manager's salary

=2050+2840+870+1340+270+2550+2310

=12230$

6)Total variable costs=Speakers used in the keyboard+Cost to run an ad on local radio stations + Wages of person who attaches legs to keyboards+Wages of persons who install the speakers+Glue and screws used in the keyboards

=1300+695+2050+2840+270

=7155$

7) Fixed costs=Depreciation on factory equipment+Production supervisor's salary+Utilities for the factory+Personnel manager's salary

=870+2310+1340+2550

=7070$

Note - Here we have not considered depreciation of CEO's company car is not considered. Basically it is no where related to the product directly or indirectly.It is considered to be a fixed cost of the company but it is not related to the product.

So if we consider it to be in the calculation of fixed costs,

Total fixed costs= 7070+170

7240$ ( 170$ is the depreciation on the CEO's company car)