Question

Ohno Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Ohno's monthly manufacturing cost and other expense data are as follows. Rent on factory equipment Insurance on factory building Raw materials (plastics, polystyrene, etc.) Utility costs for factory Supplies for general office Wages for assembly line workers Depreciation on office equipment Miscellaneous materials (glue, thread, etc.) Factory manager's salary Property taxes on factory building Advertising for helmets Sales commissions Depreciation on factory building $11.400 2,500 80,000 1,000 400 59,000 900 1,400 6,700 500 14,500 10,800 1,600

Answer 1

Solution

Cost Item	Direct material	Direct labor	Manufacturing Overheads	Period Cost
Rent on factory equipment			$    11,400.00
Insurance on factory building			$       2,500.00
Raw materials	$    80,000.00
Utility costs for factory			$       1,000.00
Supplies for general office				$          400.00
Wages for assembly line workers		$    59,000.00
Depreciation on office equipment				$          900.00
Miscellaneous materials			$       1,400.00
Factory manager’s salary			$       6,700.00
Property taxes on factory building			$          500.00
Advertising for helmets				$    14,500.00
Sales commissions				$    10,800.00
Depreciation on factory building			$       1,600.00
Total	$    80,000.00	$    59,000.00	$    25,100.00	$    26,600.00

.

Production cost per helmet

$             16.41

Working

Total manufacturing cost (80000+59000+25100)	$ 164,100.00
Divided by : Number of helmets	10,000
Production cost per helmet	$             16.41