Technical Measurement Company manufactures precision-measuring devices used by i

Question

Technical Measurement Company manufactures precision-measuring devices used by industrial companies in various capacities. The devices are produced in two stages: Assembly and Testing. The company has no beginning inventories because all units produced last year were sold by the end of the year. At the beginning of the year, the company has an order of 8,000 units. The company's predetermined overhead rate is based on materials used in assembly and direct labor hours in testing. Information concerning the predetermined overhead rates appears below: Direct labor is paid $20 per hour.

Required:

1. Compute the predetermined overhead rate for each department.

2. Calculate the total and per unit cost of producing 8,000 units.

Assembly Testing Budgeted overhead $1,000,000 $500,000 Budgeted material use 2,000,000 50,000 Budgeted direct labor hours 200,000 100,000 Budgeted direct labor cost 3,000,000 1,500,000 Assembly Testing Materials requisitioned $2,200,000 $48,000 Direct labor cost 3,100,100 1,575,000 Actual overhead cost 1,200,000 475,000

Explanation / Answer

Requirement 1 Predetermined overhead rate Assembly Department: Budgeted Overhead 10,00,000 Budgeted Material Use 20,00,000 Overhead Rate (1,000,000/2,000,000) 0.50 per $ dollar of Material use Testing Department: Budgeted Overhead     5,00,000 Direct labour Hours     1,00,000 Overhead Rate (500,000/100,000) 5.00 per Hour Assembly Testing Total Materials requisitioned 22,00,000 48,000 22,48,000 Direct labor cost 31,00,100 15,75,000 46,75,100 Overhead 11,00,000 3,93,750 14,93,750 (2,200,000X0.50) (1,575,000/20*5) Total Cost 64,00,100 20,16,750 84,16,850 Number of Units produced         8,000 Unit cost 1,052.11

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