Problem 1

Elvist Company, a manufacturer of tennis rackets, started production in November 2017. For the preceding 5 years, Elvist had been a retailer of sports equipment. After a thorough survey of tennis racket markets, Elvist 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 $15 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. Janitorial costs are $1,400 monthly. Advertising costs for the rackets will be $8,000 per month. The factory building depreciation expense is $8,400 per year. Property taxes on the factory building will be $9,600 per year. Instructions (a) Prepare an answer sheet with the following column headings. Product Costs Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs Assuming that Elvist manufactures, on average, 2,500 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