1. Acquired $750,000 of cash from the owners. 2. Purchased $270,000 of manufacturing equipment. The equipment has a $30,000 salvage value and a four-year useful life. The company uses straight-line depreciation. 3. The company started and completed 5,000 modems. Direct materials purchased and used amounted to $40 per unit. 4. Direct labor costs amounted to $25 per unit. 5. The cost of manufacturing supplies used amounted to $4 per unit. 5. The company paid $50,000 to rent the manufacturing facility. 7. Magnificent sold all 5,000 units at a cash price of $120 per unit. (Hint: It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.) 8. The sales staff was paid a $6 per unit sales commission. 9. Paid $39,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,000 salvage value and a three-year useful life. . Administrative expenses consisting of office rental and salaries amounted to $71,950. Required a. Based on these data, identify each cost incurred by the company as (1) fixed versus variable relative to the number of units produced and sold; and (2) product versus selling, general, and administrative (SG&A). The solution for the first Item is shown as an example. b. Complete the following table to indicate the product cost per unit assuming levels of production of 5,000, 6,000, 7,000, and 8,000.
1. Acquired $750,000 of cash from the owners. 2. Purchased $270,000 of manufacturing equipment. The equipment has a $30,000 salvage value and a four-year useful life. The company uses straight-line depreciation. 3. The company started and completed 5,000 modems. Direct materials purchased and used amounted to $40 per unit. 4. Direct labor costs amounted to $25 per unit. 5. The cost of manufacturing supplies used amounted to $4 per unit. 5. The company paid $50,000 to rent the manufacturing facility. 7. Magnificent sold all 5,000 units at a cash price of $120 per unit. (Hint: It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.) 8. The sales staff was paid a $6 per unit sales commission. 9. Paid $39,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,000 salvage value and a three-year useful life. . Administrative expenses consisting of office rental and salaries amounted to $71,950. Required a. Based on these data, identify each cost incurred by the company as (1) fixed versus variable relative to the number of units produced and sold; and (2) product versus selling, general, and administrative (SG&A). The solution for the first Item is shown as an example. b. Complete the following table to indicate the product cost per unit assuming levels of production of 5,000, 6,000, 7,000, and 8,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Acquired $750,000 of cash from the owners.
Purchased $270,0ee of manufacturing equipment. The equipment has a $30,000 salvage value and a four-year useful life. The
company uses straight-line depreciation.
3. The company started and completed 5,000 modems. Direct materials purchased and used amounted to $40 per unit.
Direct labor costs amounted to $25 per unit.
The cost of manufacturing supplies used amounted to $4 per unit.
The company paid $50,000 to rent the manufacturing facility.
Magnificent sold all 5,000 units at a cash price of $120 per unit. (Hint: It will be necessary to determine the manufacturing
costs in order to record the cost of goods sold.)
3. The sales staff was paid a $6 per unit sales commission.
b. Paid $39,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,000 salvage value and a
three-year useful life.
e. Administrative expenses consisting of office rental and salaries amounted to $71,950.
Required
a. Based on these data, Identify each cost incurred by the company as (1) fixed versus variable relative to the number of units
produced and sold; and (2) product versus selling, general, and administrative (SG&A). The solution for the first Item is shown as an
example.
b. Complete the following table to indicate the product cost per unit assuming levels of production of 5,000, 6,000, 7,000, and 8,000.
Complete this question by entering your answers in the tabs below.
Required A Required B
Complete the following table to indicate the product cost per unit assuming levels of production of 5,000, 6,000, 7,000, and
8,000.
Note: Do not round intermediate calculations. Round "Cost per unit" to 2 decimal places.
Production Levels
Per Unit
5,000
Variable cost
$
69
Fixed cost
Total (Cost of goods sold)
Cost per unit
$
455,000
$
91.00
6,000
7,000
8,000
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