Office Products produces three models of commercial shelving: the A, B, and C mo

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

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.  

A B C Total Machine hrs 8,000 6,000 4,000 18,000 Direct lab 6,000 6,000 4,000 16,000 Units Prod 1,000 500 250 1750 Dir. Material cost $20,000 $12,599 7,500 $40,000 Dir. Lab. Cost 129,000 100,000 7,100 300,00 Man. Overhead costs $500,800 Total Cost 840,800

Explanation / Answer

A B C Total Machine hrs 8,000 6,000 4,000 18,000 Direct lab 6,000 6,000 4,000 16,000 Units Prod 1,000 500 250 1750 Dir. Material cost $20,000 $12,599 7,500 $40,000 Dir. Lab. Cost 129,000 100,000 71,000 300,000 Man. Overhead costs $500,800 Total Cost $149,000 $112,599 $78,500 840,800 Allocation of Overheads using : Using Direct Labour Hours 187800 $187,800 $125,200 Using Direct Labour cost $215,344 $166,933.33 $118,522.67 using machine hours $222,577.78 $166,933.33 $111,288.89 TOTAL cost using : Using Direct Labour Hours $336,800 $300,399 $203,700 Using Direct Labour cost $364,344 $279,532 $197,023 using machine hours $371,577.78 $279,532.33 $189,788.89

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