Problem:
1. Heaven Consumer Products, Inc., has the following sales and cost data for 19A
|
Selling and administrative expenses
|
$25,000
|
|
Direct materials purchased
|
12,000
|
|
Direct labor
|
18,000
|
|
Sales
|
160,000
|
|
Direct materials inventory, beginning
|
3,000
|
|
Direct materials inventory, ending
|
2,000
|
|
Work-in-process, beginning
|
14,000
|
|
Work-in-process, ending
|
13,500
|
|
Factory depreciation
|
27,000
|
|
Indirect materials
|
4,000
|
|
Factory utilities
|
2,000
|
|
Indirect labor
|
5,500
|
|
Maintenance
|
2,000
|
|
Insurance
|
1,000
|
|
Finished goods inventory, beginning
|
6,000
|
|
Finished goods inventory, ending
|
4,000
|
1. Prepare a schedule of cost of goods manufactured for 19A.
2. Prepare an income statement for 19A.
3. Assume that the company manufactured 5,000units during the year. What was the unit cost of direct materials? What was the unit cost of factory depreciation? (Assume that depreciation is computed by the straight-line method.)
4. Repeat the computation done in part 3 for 10,000 units of output. How would the total costs of direct materials and factory overhead be affected?
5. Comment on the results you obtained in parts 3 and 4 in terms of how they affect the possible sales price.