Tamarisk Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2020. Purchase Cash paid for equipment, including sales tax of $5,300 $111,300 Freight and insurance cost while in transit 2,120 Cost of moving equipment into place at factory 3,286 Wage cost for technicians to test equipment 4,240 Insurance premium paid during first year of operation on this equipment 1,590 Special plumbing fixtures required for new equipment 8,480 Repair cost incurred in first year of operations related to this equipment 1,378 Construction Material and purchased parts (gross cost $212,000; failed to take 2% cash discount) $212,000 Imputed interest on funds used during construction (stock financing) 14,840 Labor costs 201,400 Allocated overhead costs (fixed-$21,200; variable-$31,800) 53,000 Profit on self-construction 31,800 Cost of installing equipment 4,664. Compute the total cost for each of these two pieces of equipment.

Total cost of equipment purchased = $129,426

Total cost of construction = $466,824

Explanation:

1. The computation of total cost of purchase pieces of equipment is shown below:-

Cash paid for equipment,

including sales tax of $5,300                            $111,300

Freight and insurance cost while in transit       $2,120

Cost of moving equipment                                $3,286

Wage cost for technicians                                  $4,240

Special plumbing fixtures required

for new equipment                                               $8,480

Total cost of equipment purchased                  $129,426

2. The computation of total cost of construction pieces of equipment is shown below:-

Material and purchased parts $212,000 × 0.98       $207,760

(100% - 2%)

Labor cost                                                                    $201,400

Overhead cost ($21,200 + $31,800)                           $53,000

Cost of installing equipment                                        $4,664

Total cost of construction                                         $466,824

the answer should be a)

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