Bell company, a manufacturer of audio systems, started its production in October

Question

Bell company, a manufacturer of audio systems, started its production in October 2014. For the preceding 3 years, Bell had been a retailer of audio systems. After a thouough 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$77 per unit. Workers on the production lines are on average paid $11 per hour. An audio systm usually takes 8 hours to complete. In addition, the rent on the hired to oversee production;her monthly salary is $2, 910. Factory janitouial costs are $1, 070 monthly. Advertising costs for the audio system will be $9, 490 per month. The factory building depreciation expense is $6, 840 per year. Property taxes on the factory building will be $7, 920 per year. Prepare an answer sheet assuming that Bell manufactures, on average, 1, 610 audio systems per month. Prepare an answer sheet assuming that Bell manufactures, on average, 1, 610 audio systems per month.

Explanation / Answer

COST ITEMS DIRECT MATERIAL DIRECT LABOUR MANUFACTURING OVERHEAD PERIOD COST(annual cost) Raw material = 1610 X 77 = $ 123970 =$ 14,87,640 Wages to workers = 1610 X 8 X 11 = $141680 =$ 17,00,160 Rent on Equipment $ 4650 =$ 55,800 Indirect Material = 1610 X 7 = $ 11270 =$ 1,35,240 Factory supervisory salary $ 2910 =$ 34,920 Janitorial cost $ 1070 =$ 12,840 Advertising $ 9490 =$ 1,13,880 Depreciation factory building $ 6840/12= $ 570 $ 6,840 Property tax of factory building $ 7920/12 = $ 660 $ 7,920 $ 1,23,970 $ 1,41,680 $ 30,620 $ 35,55,240

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