Question

The following cost data for the year just ended pertain to Heartstrings, Inc., a greeting card manufacturer:
Service department costs * ............... $  50,000
Direct labor: wages .................. 242,500
Direct labor: fringe benefits .............. 47,500
Indirect labor: fringe benefits .............. 15,000
Fringe benefits for production supervisor ......... 4,500
Total overtime premiums paid .............. 27,500
Cost of idle time: production employees § ........ 20,000
Administrative costs ................. 75,000
Rental of office space for sales personnel † ....... 7,500
Sales commissions .................. 2,500
Product promotion costs ............... 5,000
Direct material used ................ 1,050,000
Advertising expense ................. . 49,500
Depreciation on factory building ........... 57,500
Cost of finished-goods inventory at year-end ...... 57,500
Indirect labor: wages ................. 70,000
Production supervisor’s salary ............ 22,500
*All services are provided to manufacturing departments.
§ Cost of idle item is an overhead item; it is not included in 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.
2. One of the costs listed above is an opportunity cost. Identify this cost, and explain why it is an opportunity cost.



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  • CreatedApril 22, 2014
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