Chapter 1, Problem 1.2AP

Bell Company, a manufacturer of audio systems, started its production in October 2017. For the preceding 3 years. Bell had been a retailer of audio systems After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory.

  Raw materials cost for an audio system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. An audio system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.

  Factory janitorial costs are $ 1,300 monthly Advertising costs for the audio system will be $9,500 per month The factory building depreciation expense is $7,800 per year. Property taxes on the factory building will be $9,000 per year.

Instructions

(a) Prepare an answer sheet with the following column headings.

Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.

(b) Compute the cost to produce one audio system.

(a) DM $111,000

DL $ 90,000

M0 $ 18,100

PC $ 9,500

  Classify manufacturing costs into different categories and compute the unit cost.

 (LO 2), AP