Mannix produces different kinds of industrial packing materials, all in one manu
ID: 2460471 • Letter: M
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.
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
Explanation / Answer
Answer 1. Calculation of Overhead Cost Amount Materials Management - $10 X 5 orders 50 Chemical processing - $6.50 X 6 metric tons 39 Molding - $23.50 X 12 DLH 282 Packaging - $0.25 X 5000 Units 1,250 Total 1,621 Answer 2. Calculation of Total Cost of production Direct Materials 775 Direct Labor Costs 125 Overhead 1,621 Total cost 2,521