The following cost data for the year just ended pertain to Sentiments, Inc., a g

Question

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

*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.

Required:
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

d.Total product costs

e.Total period costs

Direct material $ 2,200,000 Advertising expense 99,000 Depreciation on factory building 116,000 Direct labor: wages 465,000 Cost of finished goods inventory at year-end 115,000 Indirect labor: wages 141,000 Production supervisor’s salary 46,000 Service department costs* 100,000 Direct labor: fringe benefits 120,000 Indirect labor: fringe benefits 32,000 Fringe benefits for production supervisor 11,000 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 6,000 Product promotion costs 10,000

Explanation / Answer

a) Calculate Prime Cost Particulars Amount Direct materials used 2200000 Direct labor: wages 465000 Direct labor: Fringe benefits 120000 Total Prime costs 2785000 b) Total manufacturig overhead costs Indirect labor : Fringe benefit 32000 Fringe benefits for production supervisor 11000 Total overtime premiums paid 55000 cost of idle time: production employees 40000 Depreciation on factory building 116000 indirect labor : wages 141000 product supervisors salary 46000 Service department costs 100000 Total manufacturig overhead costs 541000 c) Conversion costs Direct labor 585000 manufacturing overhead 541000 Total conversion cost 1126000 d) Total product costs Direct materials 2200000 Direct labor 585000 manufacturing overhead 541000 Total production cost 3326000 e) Total period costs Administrative costs 150000 Rental office space for sales personnel 15000 Sales commission 6000 product promotion costs 10000 advertising expenses 99000 Total period costs 280000

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