Task: Various cost and sales data for Medco inc., are given below for the just completed year:
1. Purchase of Raw materials $90,000
2. Raw Materials inventory, beginning $10,000
3. Raw Materials inventory, ending $17,000
4. Depreciation, factory $42,000
5. Insurance, factory $5,000
6. Direct Labor $60,000
7. Maintenance, factory $30,000
8. Administrative expenses $70,000
9. Sales $450,000
10. Utilities, factory $27,000
11. Supplies, factory $1,000
12. Selling Expenses $80,000
13. Indirect labor $65,000
14. Work in process inventory, beginning $7,000
15. Work in process inventory, ending $30,000
16. Finished goods inventory, beginning $10,000
17. Finished goods inventory, ending $40,000
Required:
1. Prepare a schedule of cost of goods manufactured
2. Prepare an income statement
3. Assume that the company produced the equivalent of 10,000units of product during the year. What was the average cost per unit for direct materials? What was the average cost per unit for factory depreciation?
4. Assume that the company expects to produce 50,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For Factory Depreciation? (In preparing your answer, assume that the direct materials is a variable cost and that depreciation is a fixed cost; also assume that depreciation is computed on a straight line basis. )
5. As the manager responsible for production costs, explain to the president any difference in the average costs per unit between (3) and (4) above.