Mathematical Financial Annual Production in Units 50 000 100 000 Direct Material
ID: 2539728 • Letter: M
Question
Mathematical Financial
Annual Production in Units 50 000 100 000
Direct Material Costs 150 000 300 000
Direct Manufacturing Labour Cost 50 000 100 000
Direct manufacturing labour hours 2, 500 5 000
Machine Hours
25 000 50 000
Number of Production runs 50 50
Inspection hours
1 000 500
Total Manufacturing Overhead Costs are as follows:
Total
Machining costs 375 000
Setup Costs 120 000
Inspection costs 105 000
Instruction:
1. Choose a cost driver overhead cost pool and calculate the manufacturing overhead cost per unit for each product.
2. Compute the manufacturing cost per unit for each product.
Explanation / Answer
Overhead rate is used for allocate overhead costs based on the number of cost driver units. So, we can compute as follows. Cost Driver for each Overhead cost Overhead cost Amount (A) Cost Driver No. Of Driver (B) Cost Per Driver (A/B) Machining Cost 375000 Machine Hours 75000 $ 5 Per Hour Set up cost 120000 No. of Production Hours 100 $1200 Per Production Runs Inspection cost 105000 Inspection Hours 1500 $ 70 Per Hour So, Manufacturing Overhead Cost Per unit as follows. Manufacturing Overhead Cost Overhead cost Mathematical Financial Machining Cost $ 5 Per Hour X 25000 Hours = $125000 $ 5 Per Hour X 50000 Hours = $250000 Set up cost $1200 Per Production Runs x 50 = $60000 $1200 Per Production Runs x 50 = $60000 Inspection cost $ 70 Per Hour x 1000 = $70000 $ 70 Per Hour x 50 = $35000 Total 255000 345000 Manufacturing Overhead Cost Per unit Mathematical = Total of Manufacturing Overhead cost Total Annual Production in Units 255000 = $ 5.1 Per Unit 50000 Financial = Total of Manufacturing Overhead cost Total Annual Production in Units 345000 = $ 3.45 Per Unit 100000 B. Manufacturing cost per unit for each product Nature Mathematical Financial Direct Material cost 150000 300000 Direct Labour cost 50000 100000 Total Prime Cost (A) 200000 400000 Total Units (B) 50000 100000 Prime Cost Per Unit (A/B) 4 4 Add : Manufacturing Overhead cost Per unit 5.1 3.45 Total Manufacturing Cost Per Unit 9.1 7.45