the following costs relate to one months activity in martin company:\nindirect materials $300\nrent on…

the following costs relate to one months activity in martin company:\nindirect materials $300\nrent on factory building $500\nmaintenance of equipment $50\ndirect material used $1,200\nutilities on factory $250\ndirect labour $1,500\nselling expense $500\nadministrative expense $300\nwork in process inventory, beginning $600\nwork in process inventory, ending $800\nfinished goods inventory, beginning $500\nfinished goods inventory, ending $250\nsubmission instructions:\na. prepare a schedule of cost of goods manufactured in good form.\nb. determine the cost of goods sold.\nc. assume martin company produced the equivalent of 500 units during this particular month. what was the average cost per unit for direct materials? for rent on factory building?\nd. assume next month martin company plans to produce 600 units of product. what average cost per unit and total cost would you expect to be incurred for direct material? for rent?

the following costs relate to one months activity in martin company:\nindirect materials $300\nrent on factory building $500\nmaintenance of equipment $50\ndirect material used $1,200\nutilities on factory $250\ndirect labour $1,500\nselling expense $500\nadministrative expense $300\nwork in process inventory, beginning $600\nwork in process inventory, ending $800\nfinished goods inventory, beginning $500\nfinished goods inventory, ending $250\nsubmission instructions:\na. prepare a schedule of cost of goods manufactured in good form.\nb. determine the cost of goods sold.\nc. assume martin company produced the equivalent of 500 units during this particular month. what was the average cost per unit for direct materials? for rent on factory building?\nd. assume next month martin company plans to produce 600 units of product. what average cost per unit and total cost would you expect to be incurred for direct material? for rent?

Answer

Explanation:

Step1: Calculate total manufacturing overhead

Manufacturing overhead = Indirect materials + Rent on factory building + Maintenance of equipment + Utilities on factory $$= 300 + 500+50 + 250=$1100$$

Step2: Calculate total manufacturing costs

Total manufacturing costs = Direct material used+Direct labour + Manufacturing overhead $$=1200 + 1500+1100=$3800$$

Step3: Calculate cost of goods manufactured (a)

Cost of goods manufactured = Work in process inventory, beginning+Total manufacturing costs - Work in process inventory, ending $$=600 + 3800-800=$3600$$

Step4: Calculate cost of goods sold (b)

Cost of goods sold = Finished goods inventory, beginning+Cost of goods manufactured - Finished goods inventory, ending $$=500 + 3600-250=$3850$$

Step5: Calculate average cost per unit for direct materials (c - part1)

Average cost per unit for direct materials=$\frac{\text{Direct material used}}{\text{Number of units}}$ $$=\frac{1200}{500}=$2.4$$

Step6: Calculate average cost per unit for rent on factory building (c - part2)

Rent on factory building is a fixed cost. For 500 units, average cost per unit for rent on factory building=$\frac{500}{500}=$1$

Step7: Calculate expected average cost per unit and total cost for direct material (d - part1)

Direct material is a variable cost. Average cost per unit for direct material remains the same as variable cost per unit is constant. So average cost per unit for direct material=$$2.4$ Total cost for direct material=$2.4\times600=$1440$

Step8: Calculate expected average cost per unit and total cost for rent (d - part2)

Rent is a fixed cost. Total rent cost remains $$500$ (fixed cost does not change with output within relevant range) Average cost per unit for rent=$\frac{500}{600}\approx$0.83$

Answer:

a. Cost of goods manufactured: $$3600$ b. Cost of goods sold: $$3850$ c.

  • Average cost per unit for direct materials: $$2.4$
  • Average cost per unit for rent on factory building: $$1$ d.
  • Direct material:
    • Average cost per unit: $$2.4$
    • Total cost: $$1440$
  • Rent:
    • Average cost per unit: $$0.83$
    • Total cost: $$500$