On January 1, 2018, Hobart Mfg

question 63

Essay

On January 1, 2018, Hobart Mfg. Co. purchased a drill press at a cost of $36,000. The drill press is expected to last 10 years and has a residual value of $6,000. During its 10-year life, the equipment is expected to produce 500,000 units of product. In 2018 and 2019, 25,000 and 84,000 units, respectively, were produced.
-Required:
Compute depreciation for 2018 and 2019 and the book value of the drill press at December 31, 2018 and 2019, assuming the sum-of-the-years'-digits method is used.

---

Definitions:

Equivalent Units

A concept used in cost accounting to express the amount of work done in terms of fully completed units of output during a period.

Conversion Costs

Conversion costs are the sum of direct labor and manufacturing overhead costs that are required to convert raw materials into finished products.

Direct Materials

Raw materials that are directly used in the manufacturing process of a product and can be directly traced to the goods being produced.

Production Cost Report

A document summarizing the costs associated with producing a product, including materials, labor, and overhead.