Question

Company manufactures two products, Product C and Product D. The company estimated it would incur $177,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor hours. Data concerning the current period's operations appear below:

Product C Product D
Estimated volume 3,800 units 3,000 units
Direct labor hours per unit 1.20 hours 0.80 hour
Direct materials cost per unit $11.60 $23.70
Direct labor cost per unit $10.80 $7.20

Required:
a. Compute the predetermined overhead rate under the current method.
b. Determine the unit product cost of each product for the current year.

Answer 1

Following are the responses to the given question:

Step-by-step explanation:

`\text{Predetermined Overhead Rate} = \frac{\text{Total Overhead cost}}{\text{Total Direct Labor hours}}`

`= (177910)/(( 3800 * 1.2+3000 * 0.80 ))\\\\ = (177910)/((4560+2400))\\\\ = (177910)/(6960)\\\\ = \$25.56 / DLH`

`Product C \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ Product D`

`\text{Cost of direct materials per unit} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 11.6 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 23.7\\\\\text{Cost of direct labor per unit} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 10.80 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 7.20\\\\\text{Cost of overhead per device} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 30.67 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 20.45\\\\`

`\text{Cost per unit total} \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 53.04 \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 51.35\\\\\\\to 3800 * 1.20 * (25.56)/(3800) = 30.67\\\\\to 3000 * 0.80 * (25.56)/(3000) = 20.45`