Alex Industries manufacturers a famous brand of skateboard. The model is #1 in the market and Alex has a backlog of orders. The company's production capacity is 1,250 skateboards per month but the company has been maintaining 80% of full capacity, i.e., 1,000 skateboards per month. The cost of production for the month of August, along with other expenses, is as follows: Rent on production plant equipment................................................................ $ 7,000 Raw materials (wood, plastic, etc)................................................................... 75,000 Supplies for the headquarter's office............................................................... 300 Depreciation on headquarter's office equipment.......................................... 800 Plant manager's salary....................................................................................... 5,700 Advertising the skateboard................................................................................ 14,000 Depreciation on Plant building......................................................................... 1,500 Insurance on the plant....................................................................................... 2,000 Utility costs for the plant.................................................................................... 1,100 Wages for workers on the assembly line...................................................... 54,000 Other material used in plant............................................................................ 1,600 Property taxes on plant building...................................................................... 700 Commission to the sales force...................................................................... 9,000
INSTRUCTIONS: 1. Present a report that classifies all of the costs listed above as either direct materials, direct labor, manufacturing overhead, or period costs. 2. Write a brief memo to the plants manager indicating the cost to product one skateboard in August. NOTE: SHOW ALL COMPUTATIONS in detail.