Ibri Company, a manufacturer of stereo systems, started its production in January 2018. For the preceding 3 years had been a retailer of stereo systems. After a thorough survey of stereo system markets, Ibri Company decided to turn its retail store into a stereo equipment factory. Raw materials cost for a stereo system will total $77 per unit. Workers on the production lines are on average paid $11 per hour. A stereo system usually takes 4 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $5,200 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000. Factory janitorial costs are $1,000 monthly. Advertising costs for the stereo system will be $5,000 per month. The factory building depreciation expense is $8,400 per year. Property taxes on the factory building will be $12,000 per year. Instructions Prepare an answer sheet with the following column headings. Cost Items Direct Material Direct Labor Manufacturing Overhead Period Costs Assuming that Ibri Company manufactures, on average, 1,000 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns. Compute the cost to produce one stereo system.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 40P: Olin Company manufactures and distributes carpentry tools. Production of the tools is in the mature...

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Ibri Company, a manufacturer of stereo systems, started its production in January 2018. For the preceding 3 years had been a retailer of stereo systems. After a thorough survey of stereo system markets, Ibri Company decided to turn its retail store into a stereo equipment factory. Raw materials cost for a stereo system will total $77 per unit. Workers on the production lines are on average paid $11 per hour. A stereo system usually takes 4 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $5,200 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000. Factory janitorial costs are $1,000 monthly. Advertising costs for the stereo system will be $5,000 per month. The factory building depreciation expense is $8,400 per year. Property taxes on the factory building will be $12,000 per year. Instructions Prepare an answer sheet with the following column headings. Cost Items Direct Material Direct Labor Manufacturing Overhead Period Costs Assuming that Ibri Company manufactures, on average, 1,000 stereo systems per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns. Compute the cost to produce one stereo system.

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