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Bell Company 74

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Bell Company, a manufacturer of audio systems, started its production in October 2014.
For the preceding 3 years, Bell had been a retailer of audio systems. After a thorough survey
of audio system markets, Bell decided to turn its retail store into an audio equipment factory

Raw materials cost for an audio system will total $74 per unit. Workers on the production
lines are on average paid $12 per hour. An audio system usually takes 5 hours to complete.
In addition, the rent on the equipment used to assemble audio systems amounts to
$4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee
production; her monthly salary is $3,000.

Factory janitorial costs are $1,300 monthly. Advertising costs for the audio system
will be $9,500 per month. The factory building depreciation expense is $7,800 per year.
Property taxes on the factory building will be $9,000 per year.

(a) Prepare an answer sheet with the following column headings.
Product Costs
Cost Direct Direct Manufacturing Period
Item Materials Labor Overhead Costs

Assuming that Bell manufactures, on average, 1,500 audio systems per month, enter
each cost item on your answer sheet, placing the dollar amount per month under the
appropriate headings. Total the dollar amounts in each of the columns.

(b) Compute the cost to produce one audio system

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