Question

Bell Company, a manufacturer of audio systems, started its production in October 2017. 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 $75 per unit. Workers on the production lines are on average paid $13 per hour. An audio system usually takes 7 hours to complete. In addition, the rent on the equipment used to assemble audio systems amounts to $5,390 per month. Indirect materials cost $7 per system. A supervisor was hired to oversee production; her monthly salary is $3,210.Factory janitorial costs are $2,250 monthly. Advertising costs for the audio system will be $9,120 per month. The factory building depreciation expense is $6,960 per year. Property taxes on the factory building will be $8,520 per year.Assuming that Bell manufactures, on average, 1,420 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. Product CostsCost Item Direct Direct Manufacturing Period Materials Labor Overhead CostsRaw materials $ $ $ $Wages for workers Rent on equipment Indirect materials Factory supervisor’s salary Janitorial costs Advertising Depreciation on factory building Property taxes on factory building Compute the cost to produce one audio system. (Round answer to 2 decimal places, e.g. 15.25.)Production cost per system

Answer 1

Answer:

$181.55 per unit

Explanation:

product costs per month

• direct materials = $75 x 1,420 = $106,500
• direct labor = $13 x 7 x 1,420 = $129,220
• manufacturing overhead = $5,390 + ($7 x 1,420) + $3,210 + $2,250 + ($6,960/12) + ($8,520/12) = $20,080
• total product costs per month = $257,800
• total product cost per unit = $257,800 / 1,420 = $181.55 per unit

period costs

• advertising = $9,120

Product costs are all the costs that a company incurs in manufacturing a certain product, in this case the audio systems. Product costs include direct materials, direct labor and manufacturing overhead. Period costs are all other expenses incurred by the company that are not related to the production process.