Question

Problem 1-1A Cost computation, classification, and analysis LO C2, C3

[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 $496 each.

  

	Costs
1.	Plastic for casing—$22,000
2.	Wages of assembly workers—$86,000
3.	Property taxes on factory—$7,000
4.	Accounting staff salaries—$41,000
5.	Drum stands (1,000 stands purchased)—$35,000
6.	Rent cost of equipment for sales staff—$36,000
7.	Upper management salaries—$140,000
8.	Annual flat fee for factory maintenance service—$15,000
9.	Sales commissions—$25 per unit
10.	Machinery depreciation, straight-line—$48,000

Problem 1-1A Part 1

Required:
1. Classify each cost and its amount as (a) either variable or fixed and (b) either product or period. (The first cost is completed as an example.)

2. Calculate the manufacturing cost per drum set.

Answer 1

					Cost by Behaviour		Cost by function
					Variable	fixed	product	period
	Costs
1	Plastic for casing				22,000		22,000
2	Wages of assembly workers				86,000		86,000
3	property taxes on factory					7,000	7,000
4	Accounting staff salaries					41,000		41,000
5	Drum stands				35,000		35,000
6	Rent cost of Equipment for sales staff					36,000		36,000
7	Upper manangement salaries					140,000		140,000
8	Annual flat fee for factory maintenance service					15,000	15,000
9	Sales commissions				25,000			25,000
10	Machinery depreciation,straight line					48,000	48,000
2)		Manufacturing cost per drum set
	Item					total cost	per unit
	Variable production costs
	Plastic for casing					22,000	22
	wages of assembly workers					86,000	86
	Drum stand					35,000	35
	total variable production costs					143,000	143
	Fixed production costs
	property taxes on factory					7,000	7
	annual fee for factory maintenance service					15,000	15
	Machinery depreciation					48,000	48
	total fixed production costs					70,000	70
	total production cost					213,000	213