MedTech, Inc., manufactures and sells diagnostic equipment used in the medical p
ID: 2351681 • Letter: M
Question
MedTech, Inc., manufactures and sells diagnostic equipment used in the medical profession. 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 four manufacturing overhead cost drivers (activities). Assume that the direct labor rate is $29 per hour and that there were no beginning inventories. The following information was available for 2010, based on an expected production level of 342,105 units for the year:Activity(Cost Driver)...BudgetedCosts for 2010....Cost Driver Used as Allocation Base....Cost Allocation Rate
Materials handling...... $ 5,400,000............... Number of parts used .............$ 1.00 per part
Milling and grinding..... 9,000,000............... Number of machine hours ........ 11.00 per hour
Assembly and inspection..6,100,000.............. Direct labor hours worked........ 4.00 per hour
Testing ........................1,300,000 ............. Number of units tested ............ 3.80 per unit
The following production, costs, and activities occurred during the month of August:
Units Produced/Tested...Direct Materials Costs...Numberof Parts Used....Machine Hours Direct...Labor Hours
59,000....................... $3,700,000 .................295,000...................... 98,000..................... 175,000
a) Calculate the total manufacturing costs and the cost per unit produced and tested during the month of August for MedTech, Inc. (Round "Cost per unit" to 2 decimal places. Omit the "$" sign in your response.)
Total manufacturing cost $
Cost per unit produced and tested $
Explanation / Answer
Total manufacturing costs: 3,700,000 direct material 5,075,000 direct labor 295,000 materials handling ($1 per part * 295,000 parts) 1,078,000 Milling and grinding ($11 per hour * 98,000 machine hours) 700,000 Assembly and inspection ($4 per hour * 175,000 hours) 224,200 Testing ($3.80 per unit*59,000 units) 11,072,200 Total Cost per unit = 11,072,200/59,000 = $187.66 Total manufacturing cost $ 11,072,200 Cost per unit produced and tested $187.66