Question

Elliott Company, a manufacturer of tennis rackets, started production in November 2017. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tennis racket markets, Elliott decided to turn its retail store into a tennis racket factory.

Raw materials cost for a tennis racket will total $23 per racket. Workers on the production lines are paid on average $15 per hour. A racket usually takes 2 hours to complete. In addition, the rent on the equipment used to produce rackets amounts to $1,300 per month. Indirect materials cost $3 per racket.

A supervisor was hired to oversee production; her monthly salary is $3,500. Factory Janitorial costs are $1,400 monthly. Advertising costs for the rackets will be $8,000 per month. The factory building depreciation expense is $8,400 per year. Property taxes on the factory building will be $9,600 per year.

Assuming that Elliott manufactures, on average, 2,500 tennis rackets per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.

Compute the cost to produce one racket:

Direct Product Costs Direct Mfg Labor Overhead Period Costs Raw Materials (1) Wages for Workers (2) Rent on Equipment Indirect Materials (3) Factory Supervisors Salary

Answer 1

	Direct material	Direct labor	Mfg. Overhead	Period costs
Raw materials	$57,500
Wages for worker		$75,000
Rent on equipment			$1,300
Indirect materials			7,500
Factory supervisors salary			3,500
Janitorial cost			1,400
Advertising				$8,000
Depreciation on Factory Bldg			700
Property taxes on Factory Bldg			800
Totals	$57,500	$75,000	$15,200	$8,000

1.	2,500*$23 = $57,500
2.	2,500*2*$15 = $75,000
3	2,500*$3 = $7,500
4	$8,400/12 = $700
5	$9,600/12 = $800

Direct material	$57,500
Direct labor	75,000
Manufacturing overhead	15,200
Total production cost	$147,700
Production cost per racket	$59.08