An analysis of the accounts of Williams Company reveals the following manufacturing cost data for the month ended September 30, 2014.
Inventories Beginning Ending
Raw materials $12,000 $11,300
Work in process 7,500 5,000
Finished goods 10,000 12,000
Costs incurred: raw materials purchases $62,500, direct labor $51,000, manufacturing overhead $25,650. The specific overhead costs were: indirect labor $6,500, factory insurance $5,000, machinery depreciation $6,000, machinery repairs $2,800, factory utilities $3,600, miscellaneous factory costs $1,750. Assume that all raw materials used were direct materials.
Instructions
Prepare the cost of goods manufactured schedule for the month ended September 30, 2014.
(b) Williams Company is considering the purchase of a new automated assembly line for its factory. The purchase would result in several changes in Williams’ cost structure. Both direct labor and indirect labor would decrease by 40%. Factory insurance would increase to $8,000, machinery depreciation would double, machinery repairs would decrease to $500, utilities would decrease to $2,500 and miscellaneous factory costs would increase to $1,850. Materials usage would remain at current levels.
Analyze the new purchase by preparing a cost of goods manufactured schedule for September 30, 2014 using the new data. Should Williams Company make this purchase? Explain the factors that should be considered in the decision?