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The cost of the 16,000,000 good bricks dried will include all the costs of quarrying, pans and machines and drying, minus the cost of the bricks still in process of drying. As no spoilage has been included in the cost of the bricks still drying, the entire spoilage is thrown into the cost of the bricks which have been fully dried. The cost of the 16,000,000 good bricks dried is: Green bricks in dryers, November 1, 1919...

50,000 $ 280.00 Bricks from P. and M. during the year..

17,600,000 98,575.00 Drying cost


Less cost of half-dried bricks (as above)......

17,650,000 $114,105.00

800,000 4,834.00

Bricks taken from dryers...
Bricks spoiled in drying.



Good bricks dried

16,000,000 $109,271.00 The accumulated cost per M of bricks through the drying process is :

$109,271.00 - 16,000 = $6.83. The cost of the drying process per M, including the entire spoilage cost, can be computed thus: Cost of good bricks dried per M....

$6.83 Cost per M through pans and machines..


Drying cost per M good bricks...


The difference between this $1.23 rate and the $.8853 drying rate computed above should be clearly understood. The $.8853 rate includes only the direct expenses of drying, while the $1.23 includes the cost of the spoiled bricks wasted in drying. The first rate includes no spoilage and is applicable to the bricks still in the dryers; the second rate includes all of the spoilage and is applicable to the good bricks taken out of the dryers.


Exhibit F Labor ...

$27,000.00 Materials and supplies


Total cost of setting 16,000,000 bricks...


Then $27,750 = 16,000 = $1.73, setting cost per M.
The accumulated cost of the bricks set in kilns is :

Cost dried
Cost of setting



Total cost of dried bricks set.


And $137,021 = 16,000

$8.565, cost per M set.


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This burning cost must be distributed in such a way that the spoilage will all be charged to the bricks removed from the kilns and no portion of it against the burned and half-burned bricks still in the kilns. Therefore, it is necessary to compute the burning cost per M without including spoilage, and apply this rate to the burned and half-burned bricks still in kilns. The calculation of this rate is complicated by the fact that some of the bricks were fully burned and some were only half-burned during the year, and hence it is necessary to determine the equivalent of these quantities in terms of fully burned bricks.

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The year's burn, therefore, consists of the following:

100,000 half burned at November 1, 1919, equivalent to.... 50,000 Good and spoiled bricks burned and removed during the year 15,630,000 Burned bricks in the kilns at October 31, 1920......

100,000 250,000 half burned at October 31, 1920, equivalent to..... 125,000




Then $144,225.00 • 15,905 = $9.068, cost of burning per M (not including spoilage).

This rate is applied to the burned and half-burned bricks in the kilns at October 31, 1920, with the result that no spoilage cost is added until the bricks are removed from the kilns. The total quarrying, pans and machines, setting and burning cost of the bricks in the kilns at October 31, 1920, is:

100,000 fully burned :
Cost set : $8.565 x 100 =

Burning cost: $9.068 x 100 =


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The next step is to compute the cost, not including work overhead, of the 15,100,000 fully burned bricks taken from the kilns, which is done as follows:

Inventories of bricks in kilns, November 1, 1919: Green ...

80,000 $ 568.00 Half burned

100,000 1,020.00 Burned

200,000 2,950.00 Cost of bricks set during the year (exhibit F).... 16,000,000 137,021.00 Burning cost (exhibit G).....


16,380,000 $285,784.00

Total cost through burning process....
Deduct inventories in kilns October 31, 1920:
Burned ...

Half burned

250,000 Green

100,000 450,000


856.50 $ 5,893.55

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Note: It is possible that some of the spoiled bricks sold had gone no further than the drying process and were sold after having been spoiled there. If that is the case, the entire $2,000.00 should not be deducted from the burning cost, but I am assuming that a spoiled green brick would not be salable. It will be noted that the $2,000.00 deduction is not made until after adding burning cost to the burned and half burned bricks still in the kilns. This is because the cost of these bricks should not be affected by spoilage expense nor by salvage from spoiled bricks. The next step is to determine and distribute the work overhead. WORK OVERHEAD

Exhibit H Insurance

$ 2,500.00 Superintendence

10,000.00 Taxes ....

3,000.00 Depreciation-sheds and stables (20% of $2,000)...




In distributing the overhead a literal interpretation is given to the sentence in the problem: "In the case of burnt bricks work overhead is included; in other cases it is excluded." There were burnt bricks in the kiln a year ago and there are burnt bricks there now. It is assumed that overhead had been added to the 200,000 burnt bricks in the kilns at November 1, 1919; hence, of the 15,100,000 bricks removed during the year, overhead is to be added to only 14,900,000. In addition, overhead must be added to the 100,000 burnt bricks still in the kilns at October 31, 1920. The distribution is therefore as follows: 14,900,000 bricks burned during the year and removed from kilns: 149/150 of $15,900......

$15,794.00 100,000 bricks burned during the year and left in kilns : 1/150 of $15,900..


Total work overhead


The total cost of the bricks in the kilns at October 31, 1920, and the total cost of those taken from the kilns, can now be computed. 100,000 green bricks in kilns (as

Total Per M above)

$ 856.50 $ 8.565 250,000 half - burned bricks (as above)

3,274.75 13.099 100,000 burned bricks in kilns:

Cost set and burned (as above).... $ 1,762.30
Add portion of work overhead..... 106.00

1,868.30 18.683

* If the horses and carts are used in quarrying, the depreciation on horses and carts (not provided for in the problem) and on sheds and stables, should be included in quarrying cost; if used in unloading, the depreciation should be included in that process. It is possible that it should be divided between these two and perhaps other processes. For this reason it is included in the overhead.

15,100,000 burned bricks removed from

kilns :
Cost set and burned (as above).... $277,890.45
Work overhead on 14,900,000... 15,794.00 $293,684.45

$ 19.4493



Exhibit I $ 30,000.00


Total cost of unloading 15,100,000 bricks...

$ 34,000.00

Then $34,000 = 15,100 = $2.25, unloading cost per M.
The total cost of the bricks put into the yard during the year is :
Cost burned, including work overhead (as above).

$293,684.45 Unloading


Total cost of 15,100,000 bricks put into yard....... $327,684.45 Then $327,684.45 – 15,100 = $21.70096, cost per M of finished bricks. Cost Of Sales

Exhibit) 55,000 bricks in yard, November 1, 1919 (per problem)... $ 893-75 14,445,000 bricks manufactured during year (@ $21.70096)... 313,470.33

14,500,000 bricks sold

$314,364.08 The inventory of burned bricks in the yard is 655,000 (see exhibit A), and their cost is $21.70096 x 655, or $14,214.12.

Exhibit K
The NationAL SHALE Brick COMPANY, Inc.
Statement of Cost of Bricks Manufactured and Sold
November 1, 1919, to October 31, 1920

Number Cost Per M Quarrying cost (exhibit B)....... 18,000,000 $24,300.00 $ 1.35 Deduct spoilage

400,000 Cost of bricks put in pans and ma

chines Pans and machines cost (exhibit C)....

17,600,000 $24,300.00


1.38 4.22


Total cost of bricks put in dryers.... 17,600,000 $98,575.00
Add half-dried bricks in dryers, Nov.
I, 1919

50,000 280.00 Drying cost (exhibit D).





17,650,000 $1 14,105.00


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