Manufacturing costs and budgeting
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1. Define the three classes of manufacturing costs.
2. Distinguish between product and period costs.
3. List the five components of cost-volume-profit analysis.
4. Budgeting can be an important management tool if implemented properly. Identify several positive results when budgets are used properly. Since budgets affect people, identify several negative aspects if budgets are not implemented properly.
Carson Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for the production of 2,000 units. The Utilities and Maintenance are mixed costs. The fixed portions of these costs are $200 and $300, respectively.
Costs Incurred
Production in Units 2,000 3,000
Production Costs
a. Direct Materials $ 4,000 ?
b. Direct Labor 16,000 ?
c. Utilities 1,200 ?
d. Rent 3,000 ?
e. Indirect Labor 4,600 ?
f. Supervisory Salaries 1,500 ?
g. Maintenance 900 ?
h. Depreciation 2,500 ?
Instructions
Calculate the expected costs to be incurred when production is 3,000 units. Use your knowledge of cost behavior to determine which of the costs are fixed or variable, and mark your answer next to your cost figure.
Example: Shop Labor $X,XXX $X,XXX Variable
Solution Template:
Costs Incurred
Production in Units 2,000 3,000
Production Costs
a. Direct Materials $ 4,000 $
b. Direct Labor 16,000
c. Utilities 1,200
d. Rent 3,000
e. Indirect Labor 4,600
f. Supervisory Salaries 1,500
g. Maintenance 900
h. Depreciation 2,500
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Solution Summary
Discussion of fixed and variable costs in the context of manufacturing.
Solution Preview
1.
Direct Materials - Raw materials that are converted into the finished product through the manufacturing process
Direct Labor -Work of factory employees that can be physically and directly associated with converting raw materials into finished goods
Manufacturing Overhead -Costs that are indirectly associated with manufacturing the product (includes all manufacturing costs except direct materials and direct labor)
2.
Product costs ...
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