Question
BERNARD CORPORATION The BERNARD CORPORATION manufactures and sells toy chairs. It began operations on January 1, 2017. Costs incurred for 2017 are as follows (V
BERNARD CORPORATION
The BERNARD CORPORATION manufactures and sells toy chairs. It began operations on January 1, 2017. Costs incurred for 2017 are as follows (V stands for variable; F stands for fixed):
Direct materials used $147,600 V
Direct labor costs 38,400 V
Plant energy costs 2,000 V
Indirect labor costs 14,000 V
Indirect labor costs 19,000 F
Other indirect manufacturing costs 11,000 V
Other indirect manufacturing costs 14,000 F
Selling costs 128,000 V
Selling costs 48,000 F
Administrative costs 56,000 F
Variable manufacturing costs are variable with respect to units produced. Variable selling and administrative costs are variable with respect to units sold.
Inventory data are as follows:
January 1, 2017 December 31, 2017
Direct materials 0 pounds 2,400 pounds
Work in process 0 chairs 0 chairs
Finished goods 0 chairs ? chairs
Production in 2017 was 123,000 chairs. Each pound of direct materials cost $.60 per pound.
Revenues in 2017 were $594,000. The selling price per chair and the purchase price per pound of direct materials were stable throughout the year. The companys ending inventory of finished goods is carried at the average unit manufacturing cost for 2017. Finished goods inventory at December 31, 2017 was $26,000.
REQUIRED:
1. Post all the figures above into the appropriate T-accounts.
2. Compute the (1) cost of goods manufactured and (2) cost of goods sold and (3) operating income.
3. Compute the dollar cost of the 2017 purchases of direct materials.
4. Distinguish between variable costs and fixed costs. Which manufacturing costs above are variable and which are fixed.
5. What is the fixed manufacturing cost per unit for the current production? If the number of units increases to 130,000 units, what is the fixed manufacturing cost per unit? Very briefly explain why the overhead cost per unit changed or didnt change.
6. Distinguish between direct and indirect costs. If the cost object is the chair, which manufacturing costs are direct and which are indirect.
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