Morris Company makes one product, and it expects to incur a total of $600,000 in indirect (overhead) costs during the current year. Production of the product for the year is expected to be:
Required:1) Calculate a predetermined overhead rate based on the number of units of product expected to be made during the current year.2) Assuming that direct materials and direct labor costs are $10 and $15, respectively, determine the total cost per unit using the overhead rate you calculated in part (1).
What will be an ideal response?
1) Predetermined overhead rate = $600,000 ÷ 120,000 units = $5 per unit
2) Cost per unit = $10 + $15 + $5 = $30
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