Mannix produces different kinds of industrial packing materials, all in one manu

Question

Mannix produces different kinds of industrial packing materials, all in one manufacturing facility. They have identified four activities for their costing system: Materials management—allocated by number of purchase orders Chemical processing—allocated on metric tons Molding—allocated on direct labor hours Packaging—allocated by number of units produced The activity rates are as follows: Materials management $10.00 Per purchase order Chemical processing $6.50 Per metric ton Molding $23.50 Per direct labor hour Packaging $0.25 Per unit Engineering design shows that the order will require direct material worth $775, direct labor cost being $125, require 5 purchase orders to be placed, use 6 metric tons of chemical base, need 12 direct labor hours. The size of the order is to produce 5,000 units of product. Required: (1) Calculate the overhead cost of the order. (2) Calculate total cost of production of the order.

Explanation / Answer

1) Overhead cost= $10*5 + 6.50*6 + 23.50*12 + 0.25*5000 = $1621

2) Total cost of production of the order = $775 + 125 + 1621 = $2521

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