Cost Formulas Shorewood Manufacturing produces a single product requiring the fo
ID: 2509834 • Letter: C
Question
Cost Formulas Shorewood Manufacturing produces a single product requiring the following directmaterial and direct labor: Cost per Unit of Input Required Amount per Unit of Product Material A $8 / pound 10 ounces Material B $5 / pound 8 ounces Material C $20 / gallon 0.3 gallon Cutting labor $9 / hour 30 minutes Shaping labor $11 / hour 15 minutes Finishing labor $12 / hour $45 minutes Manufacturing overhead consists of indirect material, $0.60 per unit of product; indirect labor, $1,000 per month plus $0.70 per unit of product; factory maintenance, $14,000 per year plus $0.55 per unit of product; factory depreciation, $15,000 per year; and annual factory property taxes, $8,000. Selling and administrative expenses include the salaries of a sales manager, $30,000 per year; an office manager, $18,000 per year; and two salespersons, each of whom is paid a base salary of $11,000 per year and a commission of $3 per unit sold. Advertising and promotion of the product are done through a year-round media package program costing $1,000 per week. a. Analyze all cost and expense factors to determine a general formula (based on units of production) for total cost. Round variable cost per unit answers to two decimal places, if applicable
Explanation / Answer
Total Cost of Production Formula= $31.60 units/product+$6 units/product sold+160000.
Particulars Variable Cost Amount Fixed Cost Amount Material A 5 Material B 2.5 Material C 6 Direct Material 13.5 Cutting labor 4.5 Shaping labor 2.75 Finishing labor 9 Direct labor 16.25 Prime Cost 29.75 Manufacturing Overheads Indirect Material 0.60 Indirect labbor 0.70 1000 factory maintenance 0.55 14000 Factory Depreciation 15000 Factory property taxes 8000 Works Cost 31.6 38000 Selling and administrative expenses Salary of sales manager 30000 salary of office manager 18000 salesman salary-2*(11000) 22000 Salesman Commission 2*3 6 Advertising expenses(1000/week) 52000 Total Cost of Production 37.6 1,60,000