LAB #1Chapter 1Cost ClassificationsOBJECTIVE: Apply appropriate cost classifications anduse to determine average...LAB #1Chapter 1Cost...

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Accounting

LAB #1
Chapter 1
Cost Classifications
OBJECTIVE: Apply appropriate cost classifications anduse to determine average cost per unit.
--------------------------------------------------------------------------------------------------------------------
Heritage Company manufactures a beautiful bookcase thatenjoys widespread popularity. The company has a backlog of ordersthat is large enough to keep production going indefinitely at theplant’s full capacity of 4,000 bookcases per year. Annual cost dataat full capacity follow:

COST DESCRIPTION
AMOUNT
Direct materials used (wood and glass)
$430,000
Administrative salaries
110,000
Factory supervisor’s salary
70,000
Sales commissions
60,000
Depreciation, factory building
105,000
Depreciation, administrative officeequipment
      2,000
Indirect materials, factory
18,000
Factory labor (cutting and assembly)
90,000
Advertising
100,000
Insurance, factory
6,000
Property taxes, factory
20,000
Annual rental payment, factory machinery
45,000
INSTRUCTIONS: (REMINDER - You should use Excel formulasto make the calculations in #2-#5)
Enter each cost item in the appropriate column on yourspreadsheet. Each item should be classified in two ways: first, aseither variable or fixed with respect to the number of unitsproduced and sold; and second, as either a period cost or a productcost. (If the item is a product cost, it should also be classifiedas either direct or indirect.) This has been done already for thefirst two cost items as an example.
Total the dollar amounts in each of the columns on yourspreadsheet.
Compute average cost to manufacture a bookcase at thegiven activity level.
What is total prime cost?
What is total conversion cost?
NAME:
LAB 1 Cost Behavior Period Product Cost
COST ITEM Variable Fixed Cost Direct Indirect
1 Direct materials used (wood andglass)            430,000         430,000
Administrative office salaries     110,000        110,000
Factory supervisor's salary
Sales commissions
Depreciation, factory building
Depreciation, administrative officeequipment
Indirect materials, factory
Factory labor (cutting and assembly)
Advertising
Insurance, factory
Property taxes, factory
Annual rental payment, factorymachinery
2 TOTALS
3 Average cost to manufacture one bookcase
4 Total prime cost
5 Total conversion cost

COST DESCRIPTION	AMOUNT
Direct materials used (wood and glass)	$430,000
Administrative salaries	110,000
Factory supervisor’s salary	70,000
Sales commissions	60,000
Depreciation, factory building	105,000
Depreciation, administrative officeequipment	2,000
Indirect materials, factory	18,000
Factory labor (cutting and assembly)	90,000
Advertising	100,000
Insurance, factory	6,000
Property taxes, factory	20,000
Annual rental payment, factory machinery	45,000

Answer & Explanation Solved by verified expert

3.6 Ratings (464 Votes)


		Cost Behaviour		Period	Product Cost
		Variable	Fixed		direct	Indirect
Direct materials used(wood and glass)		430,000			430,000
Administrative salaries			110,000	110,000
Factory supervisor's salary			70,000			70,000
Sales commissions		60,000		60,000
Depreciation,Factory building			105,000			105,000
Depreciation,administrative office equipment			2,000	2,000
indirect materials,Factory		18,000				18,000
Factory labor (cutting and assembly)		90,000			90,000
Advertising			100,000	100,000
Insurance,Factory			6,000			6,000
property taxes,factory			20,000			20,000
Annual rental payment,factory machinery			45,000			45,000
totals		598,000	458000	272000	520,000	264000



3)	Average cost to manufacture one bookcase

	(520,000+264000)/4,000
	196


4)	Total prime cost
	Direct materials + direct labor
	520,000

5)	total conversion cost
	Direct labor + factory overhead
	90,000+264000
	354000

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In: AccountingLAB #1Chapter 1Cost ClassificationsOBJECTIVE: Apply appropriate cost classifications anduse to determine average...LAB #1Chapter 1Cost ClassificationsOBJECTIVE: Apply appropriate cost classifications anduse to determine average cost per unit.--------------------------------------------------------------------------------------------------------------------Heritage Company manufactures a beautiful bookcase thatenjoys widespread popularity. The company has a backlog of ordersthat is large enough to keep production going indefinitely at theplant’s full capacity of 4,000 bookcases per year. Annual cost dataat full capacity follow: COST DESCRIPTIONAMOUNTDirect materials used (wood and glass)$430,000Administrative salaries110,000Factory supervisor’s salary70,000Sales commissions60,000Depreciation, factory building105,000Depreciation, administrative officeequipment 2,000Indirect materials, factory18,000Factory labor (cutting and assembly)90,000Advertising100,000Insurance, factory6,000Property taxes, factory20,000Annual rental payment, factory machinery45,000INSTRUCTIONS: (REMINDER - You should use Excel formulasto make the calculations in #2-#5)Enter each cost item in the appropriate column on yourspreadsheet. Each item should be classified in two ways: first, aseither variable or fixed with respect to the number of unitsproduced and sold; and second, as either a period cost or a productcost. (If the item is a product cost, it should also be classifiedas either direct or indirect.) This has been done already for thefirst two cost items as an example.Total the dollar amounts in each of the columns on yourspreadsheet.Compute average cost to manufacture a bookcase at thegiven activity level.What is total prime cost?What is total conversion cost?NAME:LAB 1Cost BehaviorPeriodProduct CostCOST ITEMVariableFixedCostDirectIndirect1Direct materials used (wood andglass) 430,000 430,000Administrative office salaries 110,000 110,000Factory supervisor's salarySales commissionsDepreciation, factory buildingDepreciation, administrative officeequipmentIndirect materials, factoryFactory labor (cutting and assembly)AdvertisingInsurance, factoryProperty taxes, factoryAnnual rental payment, factorymachinery2TOTALS3Average cost to manufacture one bookcase4Total prime cost5Total conversion cost

NAME:

LAB 1		Cost Behavior		Period	Product Cost
	COST ITEM	Variable	Fixed	Cost	Direct	Indirect

1	Direct materials used (wood andglass)	430,000			430,000
	Administrative office salaries		110,000	110,000
	Factory supervisor's salary
	Sales commissions
	Depreciation, factory building
	Depreciation, administrative officeequipment
	Indirect materials, factory
	Factory labor (cutting and assembly)
	Advertising
	Insurance, factory
	Property taxes, factory
	Annual rental payment, factorymachinery
2	TOTALS



3	Average cost to manufacture one bookcase

4	Total prime cost

5	Total conversion cost