Company manufactures and sells custom-made windows. Its job costing system was d

Question

Company manufactures and sells custom-made windows. Its job costing system was designed using an activity-based costing approach. Direct materials and direct labor costs are accumulated separately, along with information concerning three manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $14 per hour and that there were no beginning inventories. The following information was available for 2010, based on an expected production level of 45,900 units for the year, which will require 232,000 direct labor hours: 2010 Activity (Cost Driver) Materials handling $278,400-------------- Number of parts used $0.28 per part Cutting and lathe work 2,505,600-------- Number of parts used $0.28 per part Assembly/ inspection 4,176,000---------- direct labor hours $18.00 per hour ________________________________________ The following production, costs, and activities occurred during the month of March: Units produced =3010 Direct materials costs=$107700 #of parts used=53163 Direct labor hours= 13200 (a) Calculate the total manufacturing costs and the cost per unit of the windows produced during the month of March (using the activity-based costing approach). tot mfg cost= cost/unit produced= (b) Assume instead that company applies manufacturing overhead on a direct labor hours basis (rather than using the activity-based costing system previously described). Calculate the total manufacturing cost and the cost per unit of the windows produced during the month of March. (Hint: You will need to calculate the predetermined overhead application rate using the total budgeted overhead costs for 2010. tot mfg cost= Cost/unit produced=

Explanation / Answer

a) Direct material cost $142,000 Direct labor cost (17,180 hrs x $20 per hr) $ 343,600 Total manufacturing overheads* $ 580,930 Total Manufacturing costs $1,066,530 Cost per unit = Total costs/Number of units produced = $1,066,530/3,800 units ==> $280.67 *Manufacturing overheads Materials handling (3800 number of units x $0.25 per unit) $ 950 Cutting & Lathe work (83600 no.of parts x $1.80 per part) $ 150,480 Assembly & Inspection (17,180 hours x $25 per hour) $ 429,500 Total manufacturing overhead using ABC = $ 580,930 b) Pre-determined overhead rate = Total budgeted overhead costs/Budgeted labor hours =[$325,000 + $2,340,000 + $5,000,000]/200,000 labor hours =$38.325 per labor hour Calculation of Total manufacturing costs for March Direct material costs $142,000.00 Direct labor cost (17,180 hrs x $20 per hour) $343,600.00 Manufacturing overhead applied (17,180 hrs x $38.325) $ 658,423.50 Total Manufacturing costs for March $1,144,023.50 Cost per unit = $1,144,023.50/3800 units ==> $301.06

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.