Ladoca Company, a manufacturer of tennis racquets, started production in November 2022. For the preceding five years, Ladoca had been a retailer of sports equipment. After a thorough survey of tennis racquet markets, Ladoca decided to turn its retail store into a tennis racquet factory.

Raw materials costs will total $23 per racquet. Workers on the production lines are paid on average $13 per hour. A racquet usually takes two hours to complete. In addition, the rent on the equipment used to produce racquets amounts to $1,300 per month. Indirect materials cost $3 per racquet. A supervisor was hired to oversee production; her monthly salary is $3,500.

Factory janitorial costs are $1,400 monthly. Advertising costs for the racquets will be $6,000 per month. The factory building depreciation expense is $8,400 per year. Property taxes on the factory building will be $7,200 per year. 

Instructions 

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

Assuming that Ladoca manufactures, on average, 2,500 tennis racquets per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate heading. Total the dollar amounts in each of the columns. 

b. Calculate the cost to produce one racquet. 

Transcribed Image Text:

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