Selected account balances for the year ended December 31 are provided below for Superior Company:
Selling and administrative salaries ........................... $110,000
Purchases of raw materials ....................................... $290,000
Direct labor ............................................................................ ?
Advertising expense ................................................... $80,000
Manufacturing overhead .......................................... $270,000
Sales commissions ..................................................... $50,000
Inventory balances at the beginning and end of the year were as follows:
....................................Beginning of the Year..................End of the Year
Raw materials .............................................. $40,000........................... $10,000
Work in process ...................................................... ?.................................... $35,000
Finished goods .............................................. $50,000.................................. ?
The total manufacturing costs for the year were $683,000; the goods available for sale totaled $740,000; and the cost of goods sold totaled $660,000.
Required:
1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company's income statement for the year.
2. Assume that the dollar amounts given above are for the equivalent of 40,000 units produced during the year. Compute the average cost per unit for direct materials used and the average cost per unit for manufacturing overhead.
3. Assume that in the following year the company expects to produce 50,000 units and manufacturing overhead is fixed. What average cost per unit and total cost would you expect to be incurred for direct materials? For manufacturing overhead? (Assume that direct materials is a variable cost.)
4. As the manager in charge of production costs, explain to the president the reason for any difference in average cost per unit between (2) and (3) above.