Transcribed Image Text
In: AccountingLAB #1Chapter 1Cost ClassificationsOBJECTIVE: Apply appropriate cost classifications anduse to determine average...LAB #1Chapter 1Cost ClassificationsOBJECTIVE: Apply appropriate cost classifications anduse to determine average cost per unit.--------------------------------------------------------------------------------------------------------------------Heritage Company manufactures a beautiful bookcase thatenjoys widespread popularity. The company has a backlog of ordersthat is large enough to keep production going indefinitely at theplant’s full capacity of 4,000 bookcases per year. Annual cost dataat full capacity follow: COST DESCRIPTIONAMOUNTDirect materials used (wood and glass)$430,000Administrative salaries110,000Factory supervisor’s salary70,000Sales commissions60,000Depreciation, factory building105,000Depreciation, administrative officeequipment 2,000Indirect materials, factory18,000Factory labor (cutting and assembly)90,000Advertising100,000Insurance, factory6,000Property taxes, factory20,000Annual rental payment, factory machinery45,000INSTRUCTIONS: (REMINDER - You should use Excel formulasto make the calculations in #2-#5)Enter each cost item in the appropriate column on yourspreadsheet. Each item should be classified in two ways: first, aseither variable or fixed with respect to the number of unitsproduced and sold; and second, as either a period cost or a productcost. (If the item is a product cost, it should also be classifiedas either direct or indirect.) This has been done already for thefirst two cost items as an example.Total the dollar amounts in each of the columns on yourspreadsheet.Compute average cost to manufacture a bookcase at thegiven activity level.What is total prime cost?What is total conversion cost?NAME:LAB 1Cost BehaviorPeriodProduct CostCOST ITEMVariableFixedCostDirectIndirect1Direct materials used (wood andglass) 430,000 430,000Administrative office salaries 110,000 110,000Factory supervisor's salarySales commissionsDepreciation, factory buildingDepreciation, administrative officeequipmentIndirect materials, factoryFactory labor (cutting and assembly)AdvertisingInsurance, factoryProperty taxes, factoryAnnual rental payment, factorymachinery2TOTALS3Average cost to manufacture one bookcase4Total prime cost5Total conversion cost
