Find what is the value of the total cost of production

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Reference no: EM132655003

One of the company's perfumers has created a new fragrance and the company is studying the production and marketing of this innovation on a large scale. The company will rent a factory for 10,000 riyals per month for production purposes. This manufacturer has already taken an advanced course in perfume composition to help him create fragrances. The course cost was 15,000 riyals. The company will pay a bill for renting and insuring the production equipment at a monthly cost of 8,000 riyals. The company has estimated the following costs: direct materials per unit will be 25 riyals and direct labor will be 20 riyals per unit. Time to be spent in promoting the perfume will cost 12,000 riyals per month. In addition, 20,000 riyals of the salary of the existing sales manager will be allocated to the fragrance.

Problem 1. Explain the reasons behind your classifications in requirement 2. Justify your answers. ?

Problem 2. The Company is expected to produce 10,000 bottles of the perfume. In accordance to the information provided on requirement 2, you are required to calculate the following values with the equations clearly written in the report:

2.1 What is the value of the total conversion cost? Show your work

2.2 What is the value of the total cost of production? Show your work

2.3 What is the value of the total period costs? Show your work

Reference no: EM132655003

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