Question

Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of adding a 20% markup...

Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:               

               

                Output units                                                                             1600   phones

                Machine-hours                                                                          0.40   hours/phone

                Direct manufacturing labor-hours                                   0.625   hours/phone

                                                                                                                                                               

                Direct materials per unit                                                         $20

                Direct manufacturing labor per hour                              $6.40

                Variable manufacturing overhead costs                    $14,000

                Fixed manufacturing overhead costs                         $48,000

Calculate the following components to determine price to charge:

a. Direct Materials Cost per Unit:

b. Direct Labor Cost per Unit:

c. Variable Manufacturing Cost per Unit:

d. Fixed Manufacturing Cost per Unit:

e. Total Cost per Unit:

f. Selling Price per Unit:

Business   Accounting   
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Answer #1

a. Direct Materials Cost per Unit = $20

b. Direct Labor Cost per Unit =  Direct manufacturing labor-hours per unit x Direct manufacturing labor per hour  

= 0.625 x 6.40

= $4

c. Variable Manufacturing Cost per Unit = Variable manufacturing overhead costs/Output units    

= $14,000/1,600

= $8.75

d. Fixed Manufacturing Cost per Unit = Fixed manufacturing overhead costs/Output units  

= 48,000/1,600

= $30

e. Total Cost per Unit = Direct Materials Cost per Unit + Direct Labor Cost per Unit + Variable Manufacturing Cost per Unit + Fixed Manufacturing Cost per Unit

= 20 + 4 + 8.75 + 30

= $62.75

f. Markup = 20% on cost

= 62.75 x 20%

= $12.55

Selling Price per Unit = Total Cost per Unit + Markup

= 62.75 + 12.55

= $75.30

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