A Galex Com pain, a manufacturer of stereo systems, started its production in October 2002. For the preceding 3 years Galex had been a retailer of stereo systems. Alter a thorough survey ol stereo system markets, Galex decided to turn its retail store into a stereo equipment factory.

Raw materials cost for a stereo system will total \($70\) per unit. Workers on the production lines are on average paid \($10\) per hour. A stereo system usually takes 5 hours to complete. In add it ion, the rent on the equipment used to assemble stereo systems amounts to \($4,500\) per month. Indirect materials cost \($5\) pel system. A supervision was hired to oversee production; her monthly salary is $2,700.

Janitorial costs were \($1,300\) monthly. Advertising costs for the stereo system will be

\($8,500\) per month the factory building depreciation expense is \($7,200\) per year. Property taxes on the factory building will be \($6,000\) per year.

Instructions

(a) Prepare an answer sheet with the following column headings.

Assuming that Galex manufactures, on average, 1,300 stereo systems per month, entei each cost item on youi answer sheet, placing the dollar amount per month un- der the appropriate headings. Total the dollar amounts in each "I the columns.

(b) Compute the cost to produce one stereo system.

Transcribed Image Text:

Product Costs Cost Direct Direct Manufacturing Item Materials Labor Overhead Period Costs