Cost Terminology
The following cost data for the year Just ended Pertain to Sentiments, Inc., a greeting card manufacturer:
Direct material | $2,100,000 |
Advertising expense | 99,000 |
Depreciation on factory building | 115,000 |
Direct labor: wages | 485,000 |
Cost of finished goods inventory at year-end | 115,000 |
Indirect labor: wages | 140,000 |
Production supervisor's salary | 45,000 |
Service department costs* | 100,000 |
Direct labor: fringe benefits | 95,000 |
Indirect labor: fringe benefits | 30,000 |
Fringe benefits for production supervisor : | 9,000 |
Total overtime premiums paid | 55,000 |
Cost of idle time: production employees§ | 40,000 |
Administrative costs | 150,000 |
Rental of office space for sales personnel † | 15,000 |
Sales commissions | 5,000 |
Product promotion costs | 10,000 |
*All services are provided to manufacturing departments.
§Cost of idle time is an overhead item; it is not included in the direct-labor wages given above.
†The rental of sales space was made necessary when the sales offices were converted to storage space for raw material.
Required:
1. Compute each of the following costs for the year just ended: (a) total prime costs, (b) total manufacturing overhead costs, (c) total conversion costs, (d) total product costs, and (e) total period costs.
2. One of the costs listed above is an opportunity cost. Identify this cost, and explain why it is an opportunity cost.
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