ANSWER EXERCISE MEETING 1

QUESTION 4 (a) Direct material cost:

Cost of fabric used in dresses

$60,000

Direct labor cost:

Wages of dressmakers Wages of dress designers

$5,000 4,000 9,000

Manufacturing support:

Wages of the employee who repairs the shops pattern and sewing machines 2,000

Cost of electricity used in the Pattern Department 200

Depreciation on pattern machines and sewing Machines 10,000

Cost of insurance for the production employees (could instead be included under direct labor cost) 2,000 3,000 17,200

Rent for the building (6,000 1/2)

Selling costs:

Wages of sales personnel Rent for the building (6,000 1/4)

1,000 1,500 2,500

Marketing costs:

Cost of new sign in front of retail shop Cost of advertisements in local media Cost of hiring a plane and a pilot to advertise

400 800 1,400 2,600

R & D costs:

Wages of designers who experiment with new fabrics and dress designs 3,000

General & administrative costs:

Salary of the owners assistant

1,200

Rent for the building (6,000 1/4)

1,500

2,700 $97,000

Total costs

(b)

Classifications in this question may depend on the interpretation of the production and selling processes, and assumptions about how various costs are related to activities.

Unit-related cost:

Cost of fabric used in dresses Wages of dressmakers Wages of dress designers Depreciation on pattern machines and sewing
machines (depreciation on pattern machines could be included in product-sustaining cost) Batch-related cost:

$60,000 5,000 4,000

10,000

79,000

Wages of sales personnel (could also be

classified as unit-related if customers generally purchase only one dress at a time) Product-sustaining cost: 1,000

Cost of electricity used in the Pattern

Department 200

Wages of designers who experiment with

new fabrics and dress designs Business-sustaining cost: 3,000 3,200

Wages of the employee who repairs the

pattern and sewing machines 2,000 1,200 400 800 1,400

Salary of the owners assistant Cost of new sign in front of retail shop Cost of advertisements in local media Cost of hiring a plane and a pilot to advertise Cost of insurance for the production
Employees

2,000 6,000 13,800 $97,000

Rent for the building

Total costs

QUESTION 5

(a) Cost driver rate for the machine department: $350,000/14,000 machine hrs = $25/machine hr Cost driver rate for the finishing department: $280,000/$350,000 = 80% of DL cost

(b)
Machining Department Direct material cost Direct labor cost Manufacturing support Total costs of Job 101
a b

Finishing Department $1,400 800 640b $2,840

Total $9,400 1,050 1,890 $12,340

$8,000 250 1,250a $9,500

$1,250 = $25 50 $640 = 80% of 800

QUESTION 6 Direct materials Direct labor Support costs Disposal costs of waste product Total costs Number of pounds of Goody Cost per pound of Goody $232,000 120,000 60,000 20,000 $432,000 200,000 $2.16

QUESTION 7

Materials Completed gallons Ending work-in-process gallons 6000 100% 4000 25%; 4000 10% 6000 1000 7000

Conversion 6000 400 6400

Equivalent units of production