Question

Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $553 each. Costs 1. Plastic for casing-$21,000 2. Wages of assembly workers-$82,000 3. Property taxes on factory-$7,000 4. Accounting staff salaries-$32,000 5. Drum stands (1,000 stands purchased) $40,000 6. Rent cost of equipment for sales staff-$36,000 7. Upper management salaries-$220,000 8. Annual flat fee for factory maintenance service-$14,000 9. Sales commissions $18 per unit 10. Machinery depreciation, straight-line-$47,000

Answer 1

truebeat adjusted summerized data for production of 4000 to 8000 units

adjust summerized data	Average Cost per unit	Total Dollars
Direct Materials	21	-
Direct Labour	100	-
Variable manufacturing Overhead	65	-
Fixed manufacturing overhead	-	204,500
Fixed selling & Administrative Expenses	-	324,000
Variable Selling & Administrative Expenses	9

		Variable Manufacturing Overhead	Fixed Manufacturing Overhead		Fixed Selling and Admin Expenses	Variable Selling & Admin Expenses
1	plastic for casing	21
2	wages for assembly workers	100	120,000
3	property taxes on factory		7,000
4	accounting staff salaries				32,000
5	drum stands	40
6	rent cost of equipment for sales staff				36,000
7	upper management salary				220,000
8	annual flat fee for factory maintenance	25	7,000
9	sales commission				36,000	9
10	Machinery Depreciation		70,500
		186	204,500		324,000	9

1. calculation of depreciation:

as per question 50% increase depreciation

existing deprecition = 47000

decpreciation = 47000/100*150

= $ 70,500

2. shift premium to assembly workers such that the average direct labour will increase by $ 18 a unit.

existing labour = $ 82000 for 1000 drums capacity

average labour per unit = 82000/1000

=82

hence labour = 82+18

= $100

and production supervisor salary $120,000 (fixed)

3. calculation of factory maintenance annul flat fee

existing factory maintenance = $ 14000

condition : half of the original value is fixed = 14000/2 = $7000

and variale cost $0.25 per assembly wage dollars

assembly wage $ 100 per unit

=100 X 0.25

variable factory maintenance = $ 25 per unit

fixed factory maintenance = 7,000

4. sales staff salary paid in 1st year = 18000

previous commission = $ 18 per unit

condition : twice of the amount paid in year 1 and commission reduced by 50% of the previous commission

hence sales staff salary =18000x2

   =$ 32000

hence commission = 18 - (18X50%)

= $ 9 per unit