Ladoca Company, a manufacturer of tennis rackets, started proctuction in November 2010. For the preceding 5 years Ladoca had been a retailer of sports equipment. After a thorough survey of tennis racket markets, Ladoca decided to turn its retail store into a tennis racket factory.

Raw materials cost for a tennis racket will total \(\$ 23\) per racket. Workers on the production lines are paid on average \(\$ 13\) per hour. A racket usually takes 2 hours to complete. In addition, the rent on the equipment used to produce rackets amounts to \(\$ 1,300\) per month. Indirect materials cost \(\$ 3\) per racket. A supervisor was hired to oversee production; her monthly salary is \(\$ 3,500\).

Factory janitorial costs are \(\$ 1,400\) monthly. Advertising costs for the rackets will be \(\$ 6,000\) per month. The factory building depreciation expense is \(\$ 8,400\) per year. Property taxes on the factory building will be \(\$ 5,400\) per year.

Instructions:

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

Assuming that Ladoca manufactures, on average, 2,000 tennis rackets per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns.

(b) Compute the cost to produce one racket.

Transcribed Image Text:

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