PROBLEM SET A Listed here are the total costs associated wit

PROBLEM SET A Listed here are the total costs associated with the 2017 production of 1,000 drum TrueBeat. The drum sets sell for $500 each. Variable or Fixed Product or Fixed Product Cost c Costs $17.000$17.000 C2 C3 1 Plastic for $17,000 3. Property taxes on factory-$5,000... 4. Accounting staff salaries-$35,000. . . . . … . . 5. Drum stands (1,000 stands purchased--$25,000. . . . 6. Rent cost Of equipment for sales staff-$10,000..................- nt salaries-$ 1 25,000 . .… Annual flat fee for factory maintenance service-$10,000 str Required 1. Classify each cost and its amount as (a) either variable or fixed and (b either product or period. (The Check (1) Total variable cost, $125,000 first cost is completed as an example.) 2. Compute the manufacturing cost per drum set Analysis Component 3. Assume that 1,200 drum sets are produced in the next year. What do you predict will be the total o of plastic for the casings and the per unit cost of the plastic for the casings? Explain. 4. Assume that 1,200 drum sets are produced in the next year. What do you predict will be the total co of property taxes and the per unit cost of the property taxes? Explain

Solution

1. S.No. Costs Variable or Fixed Product or Period Variable Fixed Product Period 1 Plastic for Casting - $17,000 17000 17000 2 Wages of assemby workers - $82,000 82000 82000 3 Property taxes on factory - $5,000 5000 5000 4 Accounting staff salaries - $35,000 35000 35000 5 Drum stands (1,000 stands purchased) - $26,000 26000 26000 6 Rent cost of equipment for sales staff - $10,000 10000 10000 7 Upper management salaries - $125,000 125000 125000 8 Annual flat fee for factory maintenance service - $10,000 10000 10000 9 Sales commissions - $15 per unit 15 15 10 Machinery depreciation - $40,000 40000 40000 Sales commision is shown per unit, as the total sales units is not given. 2. Manufacturing cost Plastic for Casting 17000 Drum stands 26000 Wages of assembly workers 82000 Property taxes on factory 5000 Annual fee for fatory maintenance 10000 Machinery depreciation 40000 Total manufacturing costs 180000 Total number of drums produced 1000 Manufacturing cost per drum 180 3 Total cost of plastic for casting for 1,200 drums 20400 Plastic for casting for the current year 17000 Production during current year 1000 Plastic for casting per drum 17 Expected production units during the next year 1200 Plastic for casting per drum 17 Total cost of plastic for casting for 1,200 drums 20400 Plastic for casting being a variable cost, cost per unit will be constant and the total cost will vary with the level of production. 4 Total cost of property taxes during next year 5000 Per unit cost of property taxes for next year              4.17 Property taxes , being fixed cost, the total cost will remain the same within a relevant range and the cost per unit will change based on the production level.