Chapter (2)

Basic cost concepts (Direct/Indirect classification)

The following information is obtained from the records of ABC company which manufactures tables that consist of wood and metal parts:

Relevant range	5,000	Units
Actual production	5,000	Units
Actual sales	5,000	Units
Selling price	$40/ Unit
Materials Used:
Wood	$15,000
Metal	$10,000
Paint	$ 5,000
Glue	$ 50
Screws	$ 150
Wrapping paper used by selling department	$ 500
Stationary:
Factory	$ 100
Selling department	$ 50
Administrative departments	$ 500	$ 31,350
Labor cost:
Wood and metal cutters	$10,000
Tables assemblers	$ 7,500
Sanders	$ 5,000
Factory supervisors	$ 7,000
Sales Commission	$20,000
Salaries of administrative officers	$15,000	$ 64,500
Other expenses:
Depreciation (SLM):
Factory Machines and equipment	$ 5,000
Sales equipment	$ 2,000
Administrative equipment	$ 1,000
Rent:
Factory	$ 2,000
Marketing department	$ 1,000
Administrative offices	$ 2,000
Utilities:
Factory	$ 1,000
Marketing department	$ 500
Administrative departments	$ 1,500	$ 16,000
Total		$111,850

Additional information:

There is no beginning or ending inventory of work in process (WIP).

Required:

1. Classify the above cost elements into direct and indirect costs.
2. Compute the total factory overhead expenses.
3. Compute the prime cost.
4. Compute the conversion cost.
5. Compute total marketing expenses
6. Compute total administrative expenses.
7. Prepare manufacturing statements.
8. Prepare income statement.