Aelan Products Company, a small manufacturer, has submitted the items below concerning last year's operations. The president's secretary, trying to be helpful, has alphabetized the list. Administrative salaries $4,800 Advertising expense 2,400 Depreciation—factory building 1,600 Depreciation—factory e
- Aelan Products Company, a small manufacturer, has submitted the items below concerning last year's operations. The president's secretary, trying to be helpful, has alphabetized the list.
|
Administrative salaries |
$4,800 |
|
Advertising expense |
2,400 |
|
|
1,600 |
|
Depreciation—factory equipment |
3,200 |
|
Depreciation—office equipment |
360 |
|
Direct labour cost |
43,800 |
|
Raw materials inventory, beginning |
4,200 |
|
Raw materials inventory, ending |
6,400 |
|
Finished goods inventory, beginning |
93,960 |
|
Finished goods inventory, ending |
88,820 |
|
General liability insurance expense |
480 |
|
Indirect labour cost |
23,600 |
|
Insurance on factory |
2,800 |
|
Purchases of raw materials |
29,200 |
|
Repairs and maintenance of factory |
1,800 |
|
Sales salaries |
4,000 |
|
Taxes on factory |
900 |
|
Travel and entertainment expense |
2,820 |
|
Work in process inventory, beginning |
3,340 |
|
Work in process inventory, ending |
2,220 |
Required:
a. Prepare a schedule of Cost of Goods Manufactured in good form for the last year.
b. Determine the Cost of Goods Sold for the last year.
c. The company produced 1,000 units of product during the last year. What was the average cost per unit for direct labour cost? What was the average cost per unit for factory insurance?
d. The company expects to produce 1,200 units of product during this year. What average cost per unit and what total cost would you expect the company to incur for factory insurance at this level of activity? (Assume that factory insurance is a fixed cost).
e. As the manager is responsible for production costs, explain to the manager any difference in the average costs per unit between (c) and (d) above.
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