Various cost and sales data for Medco Inc. are given for the just-completed year
ID: 2487412 • Letter: V
Question
Various cost and sales data for Medco Inc. are given for the just-completed year:
51,400
1) Assume that the company expects to produce 24,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For factory depreciation? (In preparing your answer, assume that direct materials is a variable cost and that depreciation is a fixed cost; also assume that depreciation is computed on a straight-line basis.)
2) Assuming the information given in the problem relates to the production of 30,000 fully and partially finished units during the year and that 6,000 of those units remain unsold, determine the cost components of the finished goods inventory.
Purchases of raw materials $ 174,500 Raw materials inventory, beginning 17,600 Raw materials inventory, ending 26,500 Depreciation, factory 86,400 Insurance, factory 6,900 Direct labour 73,300 Maintenance, factory 37,600 Administrative expenses 85,200 Sales 739,000 Utilities, factory 36,500 Supplies, factory 1,190 Selling expenses 97,100 Indirect labour 78,300 Work in process inventory, beginning 7,950 Work in process inventory, ending 33,800 Finished goods inventory, beginning 12,850 Finished goods inventory, ending51,400
Explanation / Answer
1) Cost of Direct material used in production
= cost of beginning inventory + purchase - cost of ending inventory
= 17600 + 174500 - 26500
= $ 165600
Total cost for 24000 units = $165600
Average cost = $165600 / 24000 = $6.90 / unit
Total depreciation for 24000 units = $86400
Average depreciation per unit = $86400 / 24000 = $3.60 / unit
Cost elements Amount Per unit cost for 30000 units Total cost for 6000 units in closing stock Direct material $ 1,65,600.00 $ 5.52 $ 33,120.00 Direct labour $ 73,300.00 $ 2.44 $ 14,660.00 Manufacturing overhead $ 2,46,890.00 $ 8.23 $ 49,378.00 Total $ 4,85,790.00 $ 16.19 $ 97,158.00Related Questions
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