Ch2 Problem 2-17 - $134.5 3. I would predict the average...

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Problem 2-17 1. Cost Item Cost Behavior Selling or Administ- rative Cost Product Cost Variable Fixed Direct Indirect Materials Used 430,000 430,000 General office salaries 110,00 0 110,000 Factory supervision 70,000 70,000 Sales commissions 60,000 60,000 Depreciation, factory build. 105,000 105,000 Depreciation, office equip. 2,000 2,000 Indirect materials, factory 18,000 18,000 Factory labor 90,000 90,000 Advertising 100,00 0 100,000 Insurance, factory 6,000 6,000 Gen. office supplies 4,000 4,000 Property taxes, factory 20,000 20,000 Utilities, factory 45,000 45,000 Total 750,000 310,00 0 522,000 430,000 108,000 2. Average product cost per bookcase = Product cost / Total Units Average product cost per bookcase = (430000+108000) / 4000 =
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Unformatted text preview: $134.5 3. I would predict the average cost to remain the same. Since Product Cost consists of Direct Materials (Materials Used) and Manufacturing Overhead (Indirect Materials + Factory Labor) and both are variable costs, I would expect the factory to use twice as little Direct materials to produce twice as little units; and adjust Indirect materials and Labor accordingly. 4. a. The neighbor would want to purchase at the products Prime Cost price and the president would want to add Manufacturing Overhead to the price. b. Cost of Goods Manufactured...
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This note was uploaded on 07/13/2009 for the course ACCOUNTING ACG2071 taught by Professor Pelt during the Spring '09 term at Gulf Coast Community College.

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