Bell Audio started its production in October 2020. For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey of audio system markets, Bell decided to turn its retail store into an audio equipment factory.

Raw material costs for an audio system will total €74 per unit. Workers on the production lines are on average paid €12 per hour. An audio system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to €4,900 per month. Indirect materials cost €5 per system. A supervisor was hired to oversee production; her monthly salary is €3,000. 

Factory janitorial costs are €1,300 monthly. Advertising costs for the audio system will be €9,500 per month. The factory building depreciation expense is €7,800 per year. Property taxes on the factory building will be €9,000 per year.

Instructions
a. Prepare an answer sheet with the following column headings.

Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter each cost item on your answer sheet, placing the amount per month under the appropriate headings. Total the amounts in each of the columns.

b. Compute the cost to produce one audio system.

Transcribed Image Text:

Product Costs Direct Direct Cost Manufacturing Period Item Labor Overhead Materials Costs