Globe Company manufactures product Z97, which incurs costs of $175 for direct materials and $140 for direct labour per unit. The company estimated its production overhead and direct labour hours for the month as follows:
Department A |
Department B |
Department C |
|
Overhead costs |
$95,000 |
$127,000 |
$83,000 |
Direct labour hours |
4,500 |
12,000 |
5,500 |
Each unit of product Z97 is produced using:
Calculate the cost of one unit of product Z97 using a company-wide overhead rate assuming the allocation base is direct labour hours.
Cost per unit can be rounded off to nearest whole number and in that case Cost will be $786
Calculation of Companywide overhead rate Total Overhead $ 305,000 (95000+127000+83000) Total Labour Hours 22,000 Hrs (4500+12000+5500) Overhead rate per Hour 13.86 Per Hour (rounded up to 2 decimals $ Calculation of Cost per unit Direct Material $ 175.00 Direct Labour $ 140.00 Overhead Cost (15+10+9) *13.86 $ 471.24 Cost per Unit $ 786.24
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