COST & CLASSIFICATION OF COST

Solutions

1. Exercise # 1

FIXED COST VARIABLE COST SEMI-VARIABLE COST

Depreciation (straight line method) Direct Materials Telephone Bill
Factory Insurance Washroom Supplies
Rent
Superintendence
Indirect labor

2. Exercise # 2

DIRECT LABOR FACTORY OVERHEAD ADMINSTRATIVE EXPENSES

Salary of Manufacturing staff
Cutting tools Legal expenses
Depreciation of factory
Supervisor ‘s wages
Maintenance parts of factory
equipment
Inspector ‘s salary
Lubricating oil
Salary of factory stores clerk
Wages of factory crane operator

3. Exercise # 3

Requirement 1:

Estimated cost to produce:

Materials ……………………………………………………………. $ 7,500

Direct labor ………………………………………………………… $ 10,100

Factory overhead:

Molding department: (800 hrs * $5) $4,000

Finishing department ($4,300 * 120%) $5,160

Factory Overhead applied $ 9,160

Estimated cost to produce ……………………………………..…….. $ 26,760

Requirement 2:

Estimated Prime cost:

Materials …………………………………….…………………. $ 7,500

Direct Labor ……………………………………………….….. $10,100

Estimated Prime cost ………………………………….. $ 17,600

Requirement 3:

Estimated Conversion cost:

Direct labor ……………………………………………….…… $10,100

Factory overhead:

Molding Department (800 hr*$5) …………..… $4,000

Finishing Department ($4,300*120%) ………. $5,160

Factory Overhead applied $ 9,160

Estimated Conversion Cost ……………………………… $ 19,260

Requirement 4:

Estimated cost to produce ……………………………………… $ 26,760

Markup (40%) …………………………………………………………. $ 10,704

Bid price ………………………………………………………………. $ 37,464