Thanks in Advance :) Perfect Pad manufacturers floor mats for trailers that are

Question

Thanks in Advance :)

Perfect Pad manufacturers floor mats for trailers that are used to transport horses. The mats provide for a firm footing surface that quickly sheds water. Mats are made to customer specifications via orders submitted over an internet site. The mats are completed and shipped in about one day. As a result, Perfect Pad does not maintain any work in process or finished goods inventory.

The following costs were incurred in producing and selling mats during August:

Synthetic rubber used in the mat $134,300

Lubricant used in the molding machine 14,000

Factory rent 9,600

Electricity to run the molding machine 2,600

Labor cost of machine operators 34,100

Internet sales site 1,500

Administrative salaries 12,500

Depreciation of molding machine 7,400

Salary of factory safety inspector 3,500

Office rent 13,500

Evaluate these costs, and determine the amount of direct material, direct labor, factory overhead, and selling/general/administrative costs. Next, identify how much is considered to be a "prime cost" and how much is considered to be a "conversion cost."

Explanation / Answer

Direct material Synthetic rubber used in the mat $134,300 Lubricant used in the molding machine $14,000 Total Direct Material $148,300 Direct Labour Labor cost of machine operators $34,100 Factory Overhead Factory rent $9,600 Electricity to run the molding machine $2,600 Depreciation of molding machine $7,400 Salary of factory safety inspector $3,500 Total factory Overhead $23,100 Selling and Administrative Expenses Internet sales site $1,500 Administrative salaries $12,500 Office rent $13,500 Total $27,500 Prime Cost=Direct material +Direct Labour 148300+34100 $182,400 Ans Convesrion Cost Direct Labour+Factory Overhead 34100+23100 57200 Ans

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