Office Products produces three models of commercial shelving: the A, B, and C mo
ID: 2415591 • Letter: O
Question
Office Products produces three models of commercial shelving: the A, B, and C models. Data on operations and costs for the month are the following:
A B C Total
Machine hours 8,000 6,000 4,000 18,000
Direct labor hours 6,000 6,000 4,000 16,000
Units produced 1,000 500 250 1,750
Direct material costs $ 20,000 $ 12,500 $ 7,500 $ 40,000
Direct labor costs 129,000 100,000 71,000 300,000
Manufacturing overhead costs 500,800
Total costs 840,800
Required: Compute the unit cost for each model, assuming Office Products uses:
(a) Direct labor hours to allocate overhead costs.
(b) Direct labor costs to allocate overhead costs.
(c) Machine hours to allocate overhead costs.
Explanation / Answer
Calculation of Unit Cost under each Alternative: A Direct Labour Hour as Base A B C Direct Material 20000 12500 7500 Direct Labour Cost 129000 100000 71000 Manufacturing OH 187800 187800 125200 Total 336800 300300 203700 Divide by No of Units 1000 500 250 Unit Cost 336.8 600.6 814.8 B Direct Labour Cost as Base A B C Direct Material 20000 12500 7500 Direct Labour Cost 129000 100000 71000 Manufacturing OH 215344 166933 118523 Total 364344 279433 197023 Divide by No of Units 1000 500 250 Unit Cost 364.3 558.9 788.1 C Machine Hour as Base A B C Direct Material 20000 12500 7500 Direct Labour Cost 129000 100000 71000 Manufacturing OH 222578 166933 111289 Total 371578 279433 189789 Divide by No of Units 1000 500 250 Unit Cost 371.6 558.9 759.2
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