Question

The following manufacturing costs were incurred by the Walmart Company in 2019:

Direct Materials	$112,500
Direct Labor	$175,000
Manufacturing overhead	$235,000

These costs were incurred to produce 25,000 units of product. Variable manufacturing overhead was 80% of the direct materials cost.

In 2020, the direct material and variable overhead costs per unit will increase by 15%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 7.5%. The company is expecting to produce 20,000 units in 2020.

What is the product costs per unit for 2020?

Answer 1

Solution :

Product Cost per Unit for 2020 is $ 24.11 (rounded off).

Working :

Product Cost per Unit in 2020

Particulars	Working	Per Unit Cost
Direct Material	$ 4.50 * 1.15	$ 5.175
Direct Labor		$ 7
Variable Manufacturing Overhead	$ 3.60 * 1.15	$ 4.14
Fixed Manufacturing Cost	($ 145,000 * 1.075) / 20,000	$ 7.794
Cost per Unit		24.109

Working on Cost for year 2019

Particulras	Total	per Unit
Direct Material	$ 112,500 / 25,000	$ 4.5
Direct Labor	$ 175,000 / 25,000	$ 7
Variable Manufacturing Overhead	($ 112,500 * 0.80) / 25,000 = $ 90,000 / 25,000	$ 3.6
Fixed Manufacturing Overhead	($ 235,000 - $ 90,000) / 25,000 = $ 145,000 / 25,000	$ 5.8

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