Selected account balances for the year ended December 31 are provided below for Superior Company:

Selling and administrative salaries...........................$110,000Insurance, factory..............................................................8,000Utilities, factory................................................................65,000Purchases of raw materials..........................................390,000Indirect labour..................................................................60,000

Direct labour..............................................................................?Advertising expense........................................................70,000Cleaning supplies, factory.................................................7,000Sales commissions...........................................................50,000Rent, factory building.......................................................90,000Maintenance, factory.......................................................40,000

Inventory balances at the beginning and end of the year were as follows:

The total manufacturing costs for the year were $753,000, the goods available for sale totalled $790,000, and the cost of goods sold totalled $740,000.

Required:

1. Prepare a schedule of cost of goods manufactured in good form 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 rent on the factory building.

3. Assume that in the following year the company expects to produce 50,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (In preparing your answer, you may assume that direct materials are a variable cost and that rent is a fixed 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 parts (2) and (3).

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Beginning of the Year End of the Year Raw materials $30,000 $10,000 Work in process 20,000 Finished goods 20,000