Cabigas Company manufactures two products, Product C and Product D. The company
ID: 2388601 • Letter: C
Question
Cabigas Company manufactures two products, Product C and Product D. The company estimated it would incur $167,140 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor hours.Data concerning the current period's operations appear below:
Product C Product D
Estimated volume 2,000 units 2,700 units
Direct labor hours per unit 2.00 hours 0.80 hour
Total Hours 4000 hour 2160 hours
Direct materials cost per unit $21.50 $24.10
Direct labor cost per unit $24.00 $ 9.60
Required:
Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year.
Explanation / Answer
This isn't that bad. The predetermined overhead is 167140. If we divide that by the total number of hours use for DL, then we get an overhead rate that tells us what the overhead is per unit of direct labor hour. So... 167140 / 6160 = 27.13 OV = 27.13 * DLhrs The unit cost is just found by adding (direct labor + direct materials + OV) / quantity PRODUCT C 24 * 2000 + 21.50 * 2000 + 27.13 * 4000 = 199520.00 199520 / 2000 = 99.76 per unit PRODUCT D 9.6 * 2700 + 24.10 * 2700 + 27.13 * 2160 = 149590.80 149590.80 / 2700 = 55.40 per unit