Ohno Company specializes in manufacturing a unique model of bicycle helmet. The

Question

Ohno Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Ohno’s monthly manufacturing cost and other expense data are as follows. Rent on factory equipment $11,300 Insurance on factory building 2,420 Raw materials (plastics, polystyrene, etc.) 83,200 Utility costs for factory 970 Supplies for general office 390 Wages for assembly line workers 58,200 Depreciation on office equipment 850 Miscellaneous materials (glue, thread, etc.) 1,390 Factory manager’s salary 6,200 Property taxes on factory building 440 Advertising for helmets 14,700 Sales commissions 10,630 Depreciation on factory building 1,660

Explanation / Answer

Direct Production Costs
Raw materials (plastics, polystyrene, etc.) 78,900
Wages for assembly line workers 59,650
= 138,550

Production Overhead
Rent on factory equipment $9,670
Insurance on factory building 2,280
Utility costs for factory 960
Miscellaneous materials (glue, thread, etc.) 1,380
Factory manager’s salary 6,750
Property taxes on factory building 450
Depreciation on factory building 1,610
= 23,100

(138,550 + 23,100) / 10,000 = $16.17 production cost per helmet

All other costs are sales and administrative costs.

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