Marine, Inc., manufactures a product that is available in both a flexible and a
ID: 2415950 • Letter: M
Question
Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company’s profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly.
Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $714,000 in overhead costs would be incurred and the company would produce and sell 2,000 units of the flexible model and 10,000 units of the rigid model. The flexible model requires 3.0 hour(s) of direct labor time per unit, and the rigid model requires 1.50 hour(s). Direct materials and labor costs per unit are given below:
Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products.
Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company’s profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly.
Explanation / Answer
total direct labor hours = (2000*3 + 10,000*1.50) = 21,000 hours
1a)Predetermined overhead rate = $714,000/21,000 = $34 per hour
ab) Unit product cost
Flexible Rigid Direct materials $125 $80 Direct labor cost 30 15 Manufacturing overhead 102 51 total $257 $146Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.