Question

P10-1 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 $11,000
Insurance on factory building 1,500
Raw materials used (plastics, polystyrene, etc.) 75,000
Utility costs for factory 900
Supplies for general offi ce 300
Wages for assembly line workers 58,000
Depreciation on offi ce equipment 800
Miscellaneous materials (glue, thread, etc.) 1,100
Factory manager’s salary 5,700
Property taxes on factory building 400
Advertising for helmets 14,000
Sales commissions 10,000
Depreciation on factory building 1,500
Instructions
(a) Prepare an answer sheet with the following column headings.
Product Costs
Cost Direct Direct Manufacturing Period
Item Materials Labor Overhead Costs
Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Total the dollar amounts in each of the columns.
(b) Compute the cost to produce one helmet.

Answer 1

a )

Product Costs
Direct Material	Direct labor	Manufacturing overhead	Period Cost
Cost item	Amount	Cost item	Amount	Cost item	Amount	Cost item	Amount
Raw materials used	$ 75000	Wages for assembly line workers	$ 58000	Rent on factory equipment	$ 11000	Supplies for general office	300
				Utility cost for factory	$ 900	Depreciation on office equipment	800
				Miscellaneous materials	$ 1100	Advertising for helmets	14,000
				Factory managers salary	$ 5700	Sales commissions	10,000
				Property taxes on factory building	$ 400
				Depreciation on factory building	$ 1500
				Insurance on factory building	$ 1500
Total	$ 75000		$ 58000		$ 22100		$ 25100
Total product costs = $75000 + $ 58000 + $ 22100                                     = $ 155100

b )

Cost to produce one helmet = Total product cost / Total units produced

Total product costs = $75000 + $ 58000 + $ 22100 = $ 155100

Total units produced = 10000 helmets

Cost to produce one helmet = $ 155100 / 10000 = $ 15.51