The expenses that will be included : direct labor, direct materials, utilities depreciation, maintenance, insurance on the equipment, rent on the plant, administrative salaries, rent for the office. In a memo format explain to Mr. Smith and the president what will be included in product costing.
1. Explain what is involved in a product costing system.
2. Explain why Wilson West manufacturing needs to have a product costing system.
3. Allocate the above expenses, Varaible cost: The unit rate is $0.25 and the actual hours are used for manufacturing are 15,000.
4. Mixed cost : The unit rate is $0.25 actural hours are 10,000 and a fixed cost is $5,000 per month.
5. Total Cost : Use your calculations from above.
6. Explain this to Mr. Smith who will prepare these calculations on a monthly basis.