(Cost driver and pre-determined overhead) Memories, Inc. (MI) produces souvenir
ID: 2556494 • Letter: #
Question
(Cost driver and pre-determined overhead) Memories, Inc. (MI) produces souvenir figurines that are sold wholesale to gift shops. They have created a new line of dolls representing historical figures. The company's goal is to produce and sell 350,000 dolls each year. MI plans to keep approximately a one-month supply of dolls in finished goods inventory MI will have 10 production lines. Each of the five workers on each line will be ion: molding, cleaning, painting, frishing, and packaging. Each of the 10 production lines can produce 20 dolls per hour. MI deals exclusively with Quality Materials, Inc. to purchase raw materials and equipment. All materials (plastic, molds, paint, etc.) are delivered within two days of ardering and MI generally holds only a one- or two- day supply in raw materials inventory The projected materials costs are: Material cost per doll Plastic Doll molds Varnish Paint Packaging $.12 .20 .08 30 04Explanation / Answer
Using normal costing, compute the cost of one of the 363,033 dolls produced in Year 1
Solution: $4
Working:
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Estimate for Year 1 Doll production
346,125
Actual Year 1 Doll production
336,033
Actual direct materials cost
248,664
Actual direct labor costs
840,082
Hours worked
84,008
Estimated overhead cost for Year 1
191,700
Actual overhead cost for Year 1
193,000
Direct Material = $248,664 / 336,033 = 0.74
Direct Labor = 840,082 / 336,033 = 2.50
Applied Overhead= Predicted overhead / 336,033 = 191,700/ 336,033 = 0.57
Cost per doll = 0.74 + 2.50 + 0.57 = 4
Estimate for Year 1 Doll production
346,125
Actual Year 1 Doll production
336,033
Actual direct materials cost
248,664
Actual direct labor costs
840,082
Hours worked
84,008
Estimated overhead cost for Year 1
191,700
Actual overhead cost for Year 1
193,000
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