Question

St. Kilda Enterprises produces parts for the electronics industry. The production manager and cost analyst reviewed...

St. Kilda Enterprises produces parts for the electronics industry. The production manager and cost analyst reviewed the accounts for the previous month and have provided an estimated breakdown of the fixed and variable portions of manufacturing overhead. Fixed Variable Total Indirect materials $ 6,000 $ 11,000 $ 17,000 Indirect labor 3,500 17,500 21,000 Supervision 12,000 4,500 16,500 Depreciation 39,000 7,000 46,000 Maintenance 19,000 24,000 43,000 Total $ 79,500 $ 64,000 $ 143,500 Direct materials for the month amounted to $112,500. Direct labor for the month was $207,500. During the month, 12,500 units were produced.

Required: a. No changes are expected in these cost relations next month. The firm has budgeted production of 16,250 units.Provide an estimate for total production cost for next month.

b. Determine the cost per unit of production for the previous month and the next month.

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Answer #1

Answer :

a Total production cost for next month $ 578700
b cost per unit of production for the previous month $ 37.08
cost per unit of production for the the next month. $ 35.61

Computation of production cost of previous month

Variable manufacturing oh $ 64000
Direct material $ 112500
Direct Labor $ 207500
Total Variable cost $ 384000
Fixed manufacturing oh $ 79500
Total Manufacturing cost $ 463500
Number of unit produced 12500
Variable cost per unit $ 384000/12500 $ 30.72
Fixed cost per unit $ 6.36
Total production cost for the previous month $ 37.08

Computation of total production cost for the next month

Variable cost $ 30.72
Budgeted production 16250 unit
Total variable cost 16250 unit * $ 30.72 $ 499200
Fixed cost $ 79500
Total production cost $ 578700

Cost per unit of production for next month = $ 578700 / 16250 = $ 35.61

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