Question

Assume that Maria Cottonwood has decided to begin production of her fire extinguisher.
Her company is Blaze Be Gone, whose costs for last month follow.
Factory rent .............. $ 2,000
Company advertising ........... 500
Wages paid to assembly workers ...... 25,000
Depreciation for salespersons’ vehicles .... 1,000
Screws .................. 250
Utilities for factory ............ 800
Production supervisor’s salary ...... 4,000
Sandpaper ................ 150
President’s salary ........... 6,000
Sheet metal .............. 7,500
Paint ................. 750
Sales commissions ........... 1,700
Factory insurance ............ 2,000
Depreciation on factory machinery .... 5,000
Wages paid to painters .......... 5,500

Required:
1. Identify each of the preceding costs as either a product or a period cost. If the cost is a product cost, decide whether it is for direct materials (DM), direct labor (DL), or manufacturing overhead (MOH).
2. Determine the total amount for each of the following:
a. Direct materials.
b. Direct labor.
c. Manufacturing overhead.
d. Prime cost.
e. Conversion cost.
f. Total product cost.
3. Explain why the depreciation on the salespersons’ vehicles is treated differently than the depreciation on the factory machines. How might this difference impact Maria’s financial statements in terms of the balance sheet and income statement?



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  • CreatedFebruary 27, 2015
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