Question

Ohno Company specializes in manufacturing a unique model of bicycle helmet. The model is well accepted by consumers, and the company has enough orders to keep the factory production at 10,000 helmets per month (80% of its full capacity). Ohno's monthly manufacturing cost and other expense data are as follows. Rent on factory equipment $11,000 Insurance on factory building 1,500 Raw materials (plastics, polystyrene, etc.) 75,000 Utility costs for factory 900 Supplies for general office 300 Wages for assembly line workers 58,000 Depreciation on office equipment 800 Miscellaneous materials (glue, thread, etc.) 1,100 Factory manager's salary 5,700 Property taxes on factory building 400 Advertising for helmets 14,000 Sales commissions 10,000 Depreciation on factory building 1,500 Margin check figures provide key numbers to confirm that you are on the right track. Instructions

(a) Prepare an answer sheet with the following column headings. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Enter each cost item on your answer sheet, placing the dollar amount under the appropriate headings. Total the dollar amounts in each of the columns. DM $75,000 DL $58,000 MO $22,100 PC $25,100
(b) Compute the cost to produce one helmet. P1-2A Classify manufacturing costs into different categories and compute the unit cost. (LO 2), AP Bell Company, a manufacturer of audio systems, started its production in October 2017.

Answer 1

a)

Cost Item Direct Direct Manufacturing Period

materials labor overhead costs

Rent on $11,000

factory equip.

Insurance on $1,500

factory building

Raw $75,000

materials

Utility costs $900

for factory

Supplies for $300

general office

Wages for $58,000

assembly line

Dep. on office $800

equip.

Miscellaneous $1,100

materials

Factory manager's $5,700

salary

Property taxes $400

on factory building

Advertising $14,000

for helmets

Sales $10,000

commissions

Dep. on factory $1,500

building

TOTAL $75,000 $58,000 $22,100 $25,100

b) the cost to produce one helmet = total manufacturing costs / total output = ($75,000 + $58,000 + $22,100) / 10,000 helmets = $15.51