USING THE DECISION TOOLS$-$CURRENT DESIGNS

Current Designs faces many situations where it needs to apply the decision tools in this chapter, such as analyzing the balance sheet for optimal inventory levels. For example, assume that the market has responded enthusiastically to a new Current Designs' model, the Otter. As a result, the company has established a separate manufacturing facility to produce these kayaks. Now assume that the company produces $1,000$ of these kayaks per month. Current Designs' monthly manufacturing costs and other data for the Otter are as follows.

Rent on manufacturing equipment $($lease cost$)$

Insurance on manufacturing building

Raw materials $($plastic$,$ fiberglass, etc.$)$

Utility costs for manufacturing facility

Supplies for administrative office

Wages for assembly line workers in manufacturing facility

Depreciation on office equipment

Miscellaneous manufacturing materials $($lubricants$,$ solders, etc.$)$

Property taxes on manufacturing building

Manufacturing supervisor's salary

Advertising for the Otter

Sales commissions

Depreciation on manufacturing building

$$24,000/$year

$$5,\frac{000}{?}$ month

$$30,000/$year $$30/$kayak

$$4,\frac{000}{?}$ month

Instructions

$($a$)$ Prepare an answer sheet with the following column headings.

$\backslash$table$[[,$Product Costs,$],[$Cost Item,Direct Materials,Direct Labor,Manufacturing Overhead,Period Costs$]]$

Enter each cost item on your answer sheet, placing an $"$X$"$ mark under the appropriate headings.

$($b$)$ Compute total manufacturing costs for the month.