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The following cost data for the year just ended pertain to Sentiments, Inc., a greeting card manufacturer:

Direct material	$	2,300,000
Advertising expense		99,000
Depreciation on factory building		115,000
Direct labor: wages		540,000
Cost of finished goods inventory at year-end		115,000
Indirect labor: wages		142,000
Production supervisor’s salary		46,000
Service department costs*		100,000
Direct labor: fringe benefits		97,000
Indirect labor: fringe benefits		30,000
Fringe benefits for production supervisor		10,000
Total overtime premiums paid		55,000
Cost of idle time: production employees§		40,000
Administrative costs		150,000
Rental of office space for sales personnel†		15,000
Sales commissions		5,000
Product promotion costs		10,000

*All services are provided to manufacturing departments.

§Cost of idle time is an overhead item; it is not included in the direct-labor wages given above.

†The rental of sales space was made necessary when the sales offices were converted to storage space for raw material.

1. Compute each of the following costs for the year just ended:

a. Total prime costs b. Total manufacturing overhead costs C. Total conversion costs Total product costs e. Total period costs

Answer 1

Total prime costs = Direct materials + Direct labor: Wages + Direct labor: Fringe benefits
Total prime costs = $2,300,000 + $540,000 + $97,000
Total prime costs = $2,937,000

Total manufacturing overhead costs = Depreciation on factory building + Indirect labor: Wages + Production supervisor’s salary + Service department costs + Indirect labor: Fringe benefits + Fringe benefits for production supervisor + Total overtime premiums paid + Cost of idle time: Production employees
Total manufacturing overhead costs = $115,000 + $142,000 + $46,000 + $100,000 + $30,000 + $10,000 + $55,000 + $40,000
Total manufacturing overhead costs = $538,000

Total conversion cost = Direct labor: Wages + Direct labor: Fringe benefits + Total manufacturing overhead costs
Total conversion cost = $540,000 + $97,000 + $538,000
Total conversion cost = $1,175,000

Total product costs = Total prime costs + Total manufacturing overhead costs
Total product costs = $2,937,000 + $538,000
Total product costs = $3,475,000

Total period costs = Advertising expense + Administrative costs + Rental of office space for sales personnel + Sales commissions + Product promotion costs
Total period costs = $99,000 + $150,000 + $15,000 + $5,000 + $10,000
Total period costs = $279,000