Eaton Manufacturing Company produced 1,600 units of inventory in January 2014. I
ID: 2459310 • Letter: E
Question
Eaton Manufacturing Company produced 1,600 units of inventory in January 2014. It expects to produce an additional 10,400 units during the remaining 11 months of the year. In other words, total production for 2014 is estimated to be 12,000 units. Direct materials and direct labor costs are $64 and $52 per unit, respectively. Eaton Company expects to incur the following manufacturing overhead costs during the 2014 accounting period.
Production supplies $ 10,000
Supervisor salary 160,000
Depreciation on equipment 65,000
Utilities 20,000
Rental fee on manufacturing facilities 45,000
Required:
a.
Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units.
b.
Determine the cost of the 1,600 units of product made in January.
indirect overhead cost :
Direct materials:
Direct Labor :
Total:
Explanation / Answer
following manufacturing overhead costs Cost pool Production supplies 10,000 Supervisor salary 160,000 Depreciation on equipment 65,000 Utilities 20,000 Rental fee on manufacturing facilities 45,000 Total cost 300,000 No. of units 12,000 Cost driver No. of units predetermined overhead rate Total cost/no. of units 300000/12,000 25 As per ABC Determine the cost of the 1,600 units of product made in January Indirect overhead cost : 25 Direct materials: 64 Direct Labor : 52 per unit cost 141 Total cost 1600*141 225,600 As per traditional Method Units cost per unit Total Direct materials: 1,600 64 102,400 Direct Labor : 1,600 52 83,200 Yearly Monthly Production supplies 10,000 833 Supervisor salary 160,000 13,333 Depreciation on equipment 65,000 5,417 Utilities 20,000 1,667 Rental fee on manufacturing facilities 45,000 3,750 25,000 210,600
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