Question

To automate one of its production​ processes, the Milwaukee Corporation bought three flexible manufacturing cells at a price of ​$470 comma 000 each. When they were​ delivered, Milwaukee paid freight charges of ​$30 comma 000 and handling fees of ​$16 comma 000. Site preparation for these cells cost ​$39 comma 000. Four ​foremen, each earning ​$29 an​ hour, worked five​ 40-hour weeks to set up and test the manufacturing cells. Special wiring and other materials applicable to the new manufacturing cells cost ​$3 comma 600. Determine the cost basis​ (amount to be​ capitalized) for these cells

Answer 1

Answer:

$1,521,800

Explanation:

The computation of cost basis is shown below:-

Three cells cost price = 3 × $470,000

= $1,410,000

Combination of rate charges = $30,000 + $16,000 + $39,000 + $3,600

= $88,600

Wages of one foreman = wage per hour × weeks worked × hours per week

= $29 × 5 × 40

= $5,800

Wages of 4 foremen = 4 × $5,800

= $23,200

Three cells cost basis = Three cells cost price + Combination of rate charges + Wages of one foreman

= $1,410,000 + $88,600 + $23,200

= $1,521,800