Quiz 1 solutions

The following costs were incurred in September:
Direct materials
$42,700
Direct labor
$29,400
Manufacturing overhead
$27,300
Selling expenses
$23,600
Administrative expenses
$33,700

Conversion costs during the month totaled:
→
$56,700

$70,000

$72,100

$156,700

Conversion cost = Direct labor + Manufacturing overhead = $29,400 + $27,300

In September direct labor was 25% of conversion cost. If the manufacturing overhead for the month was $108,750 and the direct materials cost was $25,800, the direct labor cost was: rev: 06_06_2013_QC_31398, 09_24_2013_QC_36205
→
$36,250

$5,583

$91,250

$22,250
Givens:
Direct labor = 0.25 × Conversion cost
Manufacturing overhead = $108,750
Conversion cost = Direct labor + Manufacturing overhead
Conversion cost = Direct labor + $108,750
Conversion cost = 0.25 × Conversion cost + $108,750
0.75 × Conversion cost = $108,750
Conversion cost = $108,750 ÷ 0.75
Conversion cost = $145,000
Direct labor = 0.25 × Conversion cost = 0.25 × $145,000 = $36,250

A manufacturing company prepays its insurance coverage for a three-year period. The premium for the three years is $5,040 and is paid at the beginning of the first year. Seventy percent of the premium applies to manufacturing operations and 30% applies to selling and administrative activities. What amounts should be considered product and period costs respectively for the first year of coverage?

Product
Period

→
$1,176
$504

$3,528
$1,512

$5,040
$0

$2,352
$1,008

Annual insurance expense = $5,040 ÷ 3 = $1,680
Portion applicable to product cost = 0.70 × $1,680 = $1,176
Portion applicable to period cost = 0.30 × $1,680 = $504

Gambarini Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $208.90 per unit.

Sales volume (units)
14,400
16,230
Cost of sales
$1,094,400
$1,233,480
Selling and administrative costs
$617,800