Kabana Company, a manufacturer of stereo systems, started its
production in October 2012. For the preceding 3 years Kabana had been a
retailer of stereo systems. After a thorough survey of stereo system
markets, Kabana decided to turn its retail store into a stereo equipment
Raw materials cost for a stereo system will total $74 per
unit. Workers on the production lines are on average paid $12 per hour. A
stereo system usually takes 5 hours to complete. In addition, the rent
on the equipment used to assemble stereo systems amounts to $4,900 per
month. Indirect materials cost $5 per system. A supervisor was hired to
oversee production; her monthly salary is $3,000.
costs are $1,300 monthly. Advertising costs for the stereo system will
be $8,500 per month. The factory building depreciation expense is $7,200
per year. Property taxes on the factory building will be $9,000 per
(a) Prepare an answer sheet with the following column headings.
that Kabana manufactures, on average, 1,300 stereo systems 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 stereo system.