Misner Office Products produces three models of commercial shelving, the Basic, the Advanced and the Superior. Data on operations and costs for the month are: Basic Advanced Superior TotalMachine hours 8,000 6,000 4,000 18,000 Direct labor hours 6,000 6,000 4,000 16,000 Units produced 1,000 500 250 1,750 Direct material costs$20,000 $12,500 $7,500 $40,000 Direct labor costs 129,000 100,000 71,000 300,000 Manufacturing overhead costs 540,800 Total costs $880,800 Required:Compute the unit cost for each model, assuming Misner Office Products uses:(a) Direct labor hours to allocate overhead costs.(b) Direct labor costs to allocate overhead costs.(c) Machine hours
to allocate overhead costs.
What will be an ideal response?
(a)
Overhead rate: $540,800 / 16,000 hrs = $33.80/hr
Basic: $20,000 + $129,000 + ($33.80 × 6,000) = $351,800 / 1,000 units = $351.80
Advanced: $12,500 + $100,000 + ($33.80 × 6,000) = $315,300 / 500 units = $630.60
Superior: $7,500 + $71,000 + ($33.80 × 4,000) = $213,700 / 250 units = $854.80
(b)
Overhead rate: $540,800 / $300,000 = 180.267%
Basic: $20,000 + $129,000 + (180.267% × $129,000) = $381,544 / 1,000 units = $381.544
Advanced: $12,500 + $100,000 + (180.267% × $100,000) = $292,767 / 500 units = $585.534
Superior: $7,500 + $71,000 + (180.267% × $71,000) = $206,490 / 250 units = $825.96
(c)
Overhead rate: $540,800/18,000 Machine hrs = $30.0444/MHr
Basic: $20,000 + $129,000 + ($30.0444 × 8,000) = $389,355 / 1,000 units = $389.355
Advanced: $12,500 + $100,000 + ($30.0444 × 6,000) = $292,766 / 500 units = $585.532
Superior: $7,500 + $71,000 + ($30.0444 × 4,000) = $198,678 / 250 units = $794.712
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