coteworthy, Inc., produces and sells small electronic keyboards. Assume that you have the following information about Noteworthy’s costs for the most recent month.
Depreciation on factory equipment $800
Depreciation on CEO's company car $100
Speakers used in the keyboard $1,100
Production supervisor's salary $2,800
Glue and screws used in the keyboards $370
Wages of persons who install the speakers $3,000
Cost to run an ad on local radio stations $600
Utilities for the factory $1,200
Personnel manager's salary 2,500
Wages of person who attaches legs to keyboards $1,950
Required:
1.Calculate the total product cost for Noteworthy.
2.Calculate the prime cost for Noteworthy.
3.Calculate the conversion cost for Noteworthy.
4.Calculate the manufacturing overhead for Noteworthy.
5.Calculate the direct labor for Noteworthy.
6.Calculate the total variable cost (with number of units produced as the activity) for Noteworthy.
7.Calculate the total fixed cost (with number of units produced as the activity) for Noteworthy.
To answer each of the questions, we need to identify the relevant costs and categorize them accordingly.
1. Total Product Cost:
The total product cost includes all costs directly incurred in the production of goods. It consists of direct materials, direct labor, and manufacturing overhead.
From the given information, the direct materials cost includes the cost of speakers, glue, and screws, which amounts to $1,100 + $370 = $1,470.
The direct labor cost includes the wages of persons who install the speakers and attach legs to keyboards, which amounts to $3,000 + $1,950 = $4,950.
The manufacturing overhead cost includes the depreciation on factory equipment, cost to run an ad on local radio stations, and utilities for the factory, which amounts to $800 + $600 + $1,200 = $2,600.
Therefore, the total product cost for Noteworthy is:
Total Product Cost = Direct Materials + Direct Labor + Manufacturing Overhead
Total Product Cost = $1,470 + $4,950 + $2,600
Total Product Cost = $9,020
2. Prime Cost:
The prime cost includes only the direct costs of production, which are the direct materials and direct labor costs. So, the prime cost for Noteworthy is:
Prime Cost = Direct Materials + Direct Labor
Prime Cost = $1,470 + $4,950
Prime Cost = $6,420
3. Conversion Cost:
The conversion cost includes the costs required to convert the raw materials into finished products and includes direct labor and manufacturing overhead. So, the conversion cost for Noteworthy is:
Conversion Cost = Direct Labor + Manufacturing Overhead
Conversion Cost = $4,950 + $2,600
Conversion Cost = $7,550
4. Manufacturing Overhead:
Manufacturing overhead includes all indirect manufacturing costs associated with production. From the given information, the manufacturing overhead for Noteworthy is:
Manufacturing Overhead = Depreciation on Factory Equipment + Cost to Run an Ad + Utilities for the Factory
Manufacturing Overhead = $800 + $600 + $1,200
Manufacturing Overhead = $2,600
5. Direct Labor:
Direct labor refers to the wages paid to workers who directly work on the production of goods. From the given information, the direct labor cost for Noteworthy is:
Direct Labor = Wages of Persons Who Install the Speakers + Wages of Person Who Attaches Legs to Keyboards
Direct Labor = $3,000 + $1,950
Direct Labor = $4,950
6. Total Variable Cost:
To calculate the total variable cost, we need the number of units produced. As the number of units produced is not given, this question cannot be answered accurately without that information.
7. Total Fixed Cost:
Similarly, to calculate the total fixed cost, we need the number of units produced. As the number of units produced is not given, this question cannot be answered accurately without that information.