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Various cost and sales data for Meriwell Company for the just completed year appear in the worksheet below:
Finished goods inventory, beginning
$20,000
Finished goods inventory, ending
$40,000
Depreciation, factory
$27,000
Administrative expenses
$110,000
Utilities, factory
$8,000
Maintenance, factory
$40,000
Supplies, factory
$11,000
Insurance, factory
$4,000
Purchases of raw materials
$125,000
Raw materials inventory, beginning
$9,000
Raw materials inventory, ending
$6,000
Direct labor
$70,000
Indirect labor
$15,000
Work in process inventory, beginning
$17,000
Work in process inventory, ending
$30,000
Sales
$500,000
Selling expenses
$80,000
1. Prepare a schedule of cost of goods manufactured.
2. Prepare an income statement.
3. Assume that the company produced the equivalent of 10,000 units of product the year juts completed. What was the average cost per nit for direct materials? What was the average cost per unit for factory depreciation?
4. Assume that the company expects to produce 15,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity for factory depreciation? (In preparing you answer, assume that direct materials are a variable cost and that depreciation is a fixed cost; also assume that deprecation is computed on a straight-line basis).
5. As the manger responsible for production costs, explain to the president any difference in the average costs per unit between (3) and (4) above.
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