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Foxwood Company is a metal- and woodcutting manufacturer, selling products to the home- construction market. Consider the following data for 2017: Sandpaper Materials-handling costs Lubricants
Foxwood Company is a metal- and woodcutting manufacturer, selling products to the home- construction market. Consider the following data for 2017: Sandpaper Materials-handling costs Lubricants and coolants Miscellaneous indirect manufacturing labor Direct manufacturing labor Direct materials inventory, Jan. 1, 2017 Direct materials inventory, Dec. 31, 2017 Finished-goods inventory, Jan. 1, 2017 Finished-goods inventory, Dec. 31, 2017 Work-in-process inventory, Jan. 1, 2017 Work-in-process inventory, Dec. 31, 2017 Plant-leasing costs Depreciation-plant equipment Property taxes on plant equipment Fire insurance on plant equipment Direct materials purchased Revenues Marketing promotions Marketing salaries Distribution costs Customer-service costs $ 2,000 70,000 5,000 40,000 300,000 40,000 50,000 100,000 150,000 10,000 14,000 54,000 36,000 4,000 3,000 460,000 1,360,000 60,000 100,000 70,000 100,000 Required 1. Prepare an income statement with a separate supporting schedule of cost of goods manu- factured. For all manufacturing items, classify costs as direct costs or indirect costs and indicate by Vor F whether cach is a variable cost or a fixed cost (when the cost object is a product unit). If in doubt, decide on the basis of whether the total cost will change sub- stantially over a wide range of units produced. 2. Suppose that both the direct material costs and the plant-leasing costs are for the produc- tion of 900,000 units. What is the direct material cost of each unit produced? What is the plant-leasing cost per unit? Assume that the plant-leasing cost is a fixed cost. 3. Suppose Foxwood Company manufactures 1,000,000 units next year. Repeat the compu- tation in requirement 2 for direct materials and plant-leasing costs. Assume the implied cost-behavior patterns persist. 4. As a management consultant, explain concisely to the company president why the unit cost for direct materials did not change in requirements 2 and 3 but the unit cost for plant- leasing costs did change
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