Question

Chapter 14 Homework Saved Save & Exit Submit Help Check my work 6. Required information Part 2 of 2 (The following information applies to the questions displayed below.) Listed here are the total costs associated with the 2017 production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $467 each. points Costs 1. Plastic for casing-$16,000 2. Wages of assembly workers-$92,000 3. Property taxes on factory-$5,000 4. Accounting staff salaries-$33,000 5. Drum stands (1,000 stands purchased)-$37,000 6. Rent cost of equipment for sales staff-$24,000 7. Upper management salaries-$150,000 8. Annual flat fee for factory maintenance service-$22,000 9. Sales commissions-$25 per unit 10. Machinery depreciation, straight-line-$37,000 Print References 2. Calculate the manufacturing cost per drum set. TrueBeat Calculation of Manufacturing Cost per Drum Set

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Answer 1

TrueBeat Calculation of Manufacturing Cost per Drum Set For Year ended December 31, 2017 Total cost Per unit cost Item Variable production costs Plastic for Casing 16,000 16 Wages of assembly workers Drum Stands 92,000 92 37,000 37 Total variable production costs 145,000 145 Fixed production costs Property taxes on factory 5,000 Annual flat fee for factory maintenance service 22,000 22 Machinery Depreciation, straight line 37,000 37 Total fixed production costs 64,000 64 Total production costs 209,000 209 Reasons: Variable costs - The variable costs are the one which varies with the output level. In our case, costs involved in plastic for casing, wages for workers and drum stands are the only variable costs because these are directly related to the output level. (For Eg) The company would not have incurred these costs had there been no production during the year. Fixed costs - The fixed costs are the one which are constant irrespective of level of output. In our case, costs related to property taxes, factory maintenance fee, machinery depreciation are fixed costs since the costs are fixed irrespective of produciton during the year. (For eg) The company would have incurred these costs even though they had zero production during the year. Not production costs - Production costs doesn't include costs related to administrative and sales activity. In our case, accounting staff salaries and upper management salaries are admininstraive costs. Rent cost of eqiuipment for sales staff and sales commission are sales cost. So, they should not be included under production costs.