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Homework answers / question archive / Problem 1-2A (Video) Bell Company, a manufacturer of audio systems, started its production in October 2020

Problem 1-2A (Video) Bell Company, a manufacturer of audio systems, started its production in October 2020

Accounting

Problem 1-2A (Video)

Bell Company, a manufacturer of audio systems, started its production in October 2020. 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 material costs for an audio system will total $77 per unit. Workers on the production lines are on average paid $15 per hour. An audio system usually takes 7 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $6,000 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,800.

Factory janitorial costs are $2,200 monthly. Advertising costs for the audio system will be $9,200 per month. The factory building depreciation expense is $6,000 per year. Property taxes on the factory building will be $9,600 per year.
 
Assuming that Bell manufactures, on average, 1,000 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.
 
   
Product Costs
   

Cost Item
 
Direct
Materials
 
Direct
Labor
 
Manufacturing
Overhead
 
Period
Costs
Raw materials  
$
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$
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$
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$
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Wages for workers  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Rent on equipment  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Indirect materials  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Factory supervisor’s salary  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Janitorial costs  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Advertising  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Depreciation on factory building  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Property taxes on factory building  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
   
$
Entry field with correct answer
 
$
Entry field with correct answer
 
$
Entry field with correct answer
 
$
Entry field with correct answer

 

 

Compute the cost to produce one audio system. (Round answer to 2 decimal places, e.g. 15.25.)

 

Production cost per system

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Product Costs
   

Cost Item
 
Direct
Materials
 
Direct
Labor
 
Manufacturing
Overhead
 
Period
Costs
Raw materials  
$
Entry field with correct answer
 
$
Entry field with correct answer
 
$
Entry field with correct answer
 
$
Entry field with correct answer
Wages for workers  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Rent on equipment  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Indirect materials  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Factory supervisor’s salary  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Janitorial costs  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Advertising  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Depreciation on factory building  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
Property taxes on factory building  
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
 
Entry field with correct answer
   
$
Entry field with correct answer
 
$
Entry field with correct answer
 
$
Entry field with correct answer
 
$
Entry field with correct answer

 

Production cost per system$

Entry field with correct answer

Explanation:

Raw materials  =  $77 × 1,000  =  $77,000
Wages for workers  =  $15 × 7 × 1,000  =  $105,000
Indirect materials  =  $5 × 1,000  =  $5,000
Depreciation on factory building  =  $6,000/12  =  $500
Property taxes on factory building  =  $9,600/12  =  $800


[(MOH: $6,000 + ($5 x 1,000) + $3,800 + $2,200 + ($6,000/12) + ($9,600/12) = $18,300); (Period costs: $9,200)]

[(MOH: Rent, equip. + (Ind. mat. cost/system x No. systems) + Fact. super. sal. + Jan. costs + (Ann. depr./Mos. in a yr.) + (Ann. prop. tax./Mos. in a yr.) = Tot.); (Period costs: Advert.)]

 

 

Total production costs    
   Direct materials   $77,000
   Direct labor   105,000
   Manufacturing overhead   18,300
     Total production cost   $200,300


Production cost per system = $200,300/1,000 = $200.30

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