Question

E1-13 (Algo) Classifying and Calculating Cost [LO 1-4) Noteworthy, Inc., produces and sells small electronic keyboards. Assume that you have the following information about Noteworthy's costs for the most recent month. Depreciation on factory equipment Depreciation on CEO's company car Speakers used in the keyboard Production supervisor's salary Glue and screws used in the keyboards Wages of persons who install the speakers Cost to run an ad on local radio stations Utilities for the factory Personnel manager's salary Wages of person who attaches legs to keyboards $ 850 120 1,300 2,360 260 2,820 670 1,250 2.520 1.990 Required: 1. Calculate the total product cost for Noteworthy. 2. Calculate the prime cost for Noteworthy. 3. Calculate the manufacturing overhead for Noteworthy. 4. Calculate the direct labor for Noteworthy. 5. Calculate the conversion cost for Noteworthy. 6. Calculate the total variable cost (with number of units produced as the activity) for Noteworthy. 7. Calculate the total fixed cost (with number of units produced as the activity) for Noteworthy. $ 1. 2. 3. Total Product Cost Prime Cost Manufacturing Overhead Direct Labor Cost Conversion Cost Total Variable Cost Total Fixed Cost 14,140 X 6,370 4,460 4,810 9,270 X 6,370 X 7,770 X 5. $ 7. $

Answer 1

1	Total product cost	$10830
2	Prime cost	$6110
3	manufacturing overhead	$4720
4	direct labor cost	$4810
5	conversion cost	$6020
6	Total variable cost	$7620
7	Total fixed cost	$3210

Solution :

Costs	classification	Classification (fixed /variable)
Depreciation on factory equipment	Manufacturing overhead	fixed (production)
Depreciation on CEO's company car	Administrative overhead	fixed (administrative)
Speakers used in the keyboard	Direct material	variable (production)
Production supervisor's salary	Manufacturing overhead	fixed (production)
Glue and screws used in the manufacturing	Manufacturing overhead (indirect materials)	variable (production)
Wages of persons who Install the speakers	Direct labor	variable (production)
Cost to run an ad on local radio stations	Selling cost	fixed (selling)
Utilities for the factory	Manufacturing overhead	variable (production)
Personnel managers salary	Administrative overhead	fixed (administrative)
Wages of person who attaches legs to keyboards	Direct labor	variable (production)

1) total product cost = total direct material cost + total direct labor cost + total manufacturing overhead.

= ($1300) + ($2820 +$1990) + ($850+$2360+ $260+$1250)

= $1300 + $4810 + $4720

= $10830.

2) prime cost = direct material cost + direct labor cost + other direct overhead.

= ($1300) + ($2820+$1990) + $0

= $1300 + $4810 + $0

= $6110.

3) manufacturing overhead is the cost incurred in the factory (i.e. production plant) other than direct material and labor. So it includes indirect materials and labor and the production supervisor salary and utilities incurred in factory.

manufacturing overhead = $850+$2360+ $260+$1250 = $4720

4) direct labor cost = ($2820 + $1990) = $4810

5) convertion cost = direct labor cost + manufacturing overhead,.

= $1300+ $4720

= $6020

6) To find total variable cost with number of units produced only the variable Production cost is considered.

total variable cost = $1300 + $260 + $2820 + $1250 + $1990 = $7620

7) To find total fixed cost with number of units produced only the fixed production cost is considered.

total fixed cost = $850 + $2360 = $3210