Archer Pro manufactures two models of sport bows, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing labor costs. Equipment and maintenance costs increase with the number of machine-hours, and facility rent is paid per square foot. Capacity of the facility is 10,000 square feet, and Archer Pro is using only 75% of this capacity. Archer Pro records the cost of unused capacity as a sepa- rate line item and not as a product cost. For the current year, Archer Pro has budgeted the following: Archer Pro Budgeted Costs and Activities for the Year Ended December 31, 2017 $ 450,000 Direct materials-Basic bows Direct materials-Deluxe bows 320,000 Direct manufacturing labor-Basic bows Direct manufacturing labor-Deluxe bows Indirect manufacturing labor costs Machine setup costs Equipment and maintenance costs Facility rent 155,000 195,000 105,000 60,000 264,000 250,000 $1799,000 Total Other budget information follows: Basic Deluxe 5,000 18,000 Number of bows 10,000 Machine-hours 15,000 Number of setups Square footage of production space used 500 300 3,500 4,000

Archer Pro manufactures two models of sport bows, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing labor costs. Equipment and maintenance costs increase with the number of machine-hours, and facility rent is paid per square foot. Capacity of the facility is 10,000 square feet, and Archer Pro is using only 75% of this capacity. Archer Pro records the cost of unused capacity as a sepa- rate line item and not as a product cost. For the current year, Archer Pro has budgeted the following: Archer Pro Budgeted Costs and Activities for the Year Ended December 31, 2017 $ 450,000 Direct materials-Basic bows Direct materials-Deluxe bows 320,000 Direct manufacturing labor-Basic bows Direct manufacturing labor-Deluxe bows Indirect manufacturing labor costs Machine setup costs Equipment and maintenance costs Facility rent 155,000 195,000 105,000 60,000 264,000 250,000 $1799,000 Total Other budget information follows: Basic Deluxe 5,000 18,000 Number of bows 10,000 Machine-hours 15,000 Number of setups Square footage of production space used 500 300 3,500 4,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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