Problem 1

Griffin World manufacturers armored cars. The armor provides low level ballistics protection. Cars are made to customer specifications via orders submitted over an internet site. The cars are completed and shipped in about one day. As a result, Griffin World does not maintain any work in process or finished goods inventory. The following costs were incurred in producing and selling mats during July:

Steel used in the armoring	67,150
Armor grade glass for windows	7,000
Factory rent	4,800
Electricity to run the welding equipment	1,300
Labor cost of welders
Internet sales site	750
Administrative salaries	6,250
Depreciation of welding equipment	3,700
Salary of factory safety inspector	1,750
Office rent	6,750

Instructions:

Evaluate these costs, and determine the amount of direct material, direct labor, factory overhead, and selling/general/administrative costs. Next, identify how much is considered to be a prime cost and how much is considered to be a conversion cost.

	Total Cost		Direct Material		Direct Labor		Factory Overhead		S/G & A Cost
Steel used in the armoring	$ 67,150		$ -		$ -		$ -		$ -
Armor grade glass for windows	7,000		$ -		$ -		$ -		$ -
Factory rent	4,800		$ -		$ -		$ -		$ -
Electricity to run the welding equipment	1,300		$ -		$ -		$ -		$ -
Labor cost of welders	17,050		$ -		$ -		$ -		$ -
Internet sales site	750		$ -		$ -		$ -		$ -
Administrative salaries	6,250		$ -		$ -		$ -		$ -
Depreciation of welding equipment	3,700		$ -		$ -		$ -		$ -
Salary of factory safety inspector	1,750		$ -		$ -		$ -		$ -
Office rent	6,750		$ -		$ -		$ -		$ -
	$ 116,500		$ -		$ -		$ -		$ -