Shuster Industries manufactures baseballs and identified the following costs associated with their manufacturing activity (V = Variable; F = Fixed). The following information is available for the month of June when 25,000 baseballs were produced, but only 23,500 baseballs were sold. Power to run plant equipment (V)$25,000 Other selling costs (V) 149,150 Indirect labor (F) 50,000 Property taxes on factory building (F) 12,500 Marketing costs (V) 30,000 Factory Supervisor salaries (F) 125,000 Direct materials used (V) 500,000 Depreciation on plant equipment (F) 68,000 Shipping costs to customer (V) 48,800 Indirect material and supplies (V) 37,500 Direct labor (V) 250,000 Administrative salaries (F) 300,000 Insurance on factory building (F) 62,500 Utilities,

Question

factory (V) 50,000 General office costs (F) 48,000 Required:Compute the following amounts for July, assuming 30,000 baseballs were produced and sold: (Assume normal production ranges from 15,000 to 40,000 baseballs)(a) Total manufacturing costs.(b) Total conversion costs.(c) Period costs per unit.(d) Full costs per unit.

What will be an ideal response?

Answer 1

(a)
[($500,000 + 250,000 + 25,000 + 37,500 + 50,000)/25,000] = Variable mfg. costs per unit
Variable mfg. cost per unit = $34.50.
($34.50 × 30,000) + (50,000 + 12,500 + 125,000 + 68,000 + 62,500) = Total mfg. costs
Total manufacturing costs = $1,035,000 + $318,000 = $1,353,000.

(b)
[($250,000 + 25,000 + 37,500 + 50,000)/25,000] = Conversion costs per unit
Conversion costs per unit = $14.50.
($14.50 × 30,000) + (50,000 + 12,500 + 125,000 + 68,000 + 62,500) = Total conversion costs
Total conversion costs = $435,000 + $318,000 = $753,000.

(c)
($149,150 + 30,000 + 48,800)/23,500 = Period costs per unit
Period costs per unit = $9.70.
($9.70 × 30,000) + (300,000 + 48,000) = Total period costs
Total period costs = $639,000.
$639,000/30,000 = Period costs per unit
Period costs per unit = $21.30.

(d)
($1,353,000/30,000) + $21.30 = Full costs per unit
Full costs per unit = $66.40.