The accounting records for Portland Products report the
following manufacturing costs for the past year.
Production was 170,000 units. Fixed manufacturing overhead was $774,000.
For the coming year, costs are expected to increase as follows:
direct materials costs by 20 percent, excluding any effect of
volume changes; direct labor by 4 percent; and fixed manufacturing
overhead by 10 percent. Variable manufacturing overhead per unit is
expected to remain the same.
a. Prepare a cost estimate for a volume level
of 136,000 units of product this year.
b. Determine the costs per unit for last year and for this year.
|Cost estimate for a volume level of 136,000 units:|
|Direct material||$ 374400||= (390000/170000*136000)*1.20|
|Direct labor||$ 217152||= (261000/170000*136000)*1.04|
|Variable overhead||$ 188000||= (235000/170000*136000)|
|Fixed manufacturing overhead||$ 851400||= (774000*1.10)|
|Calculation of Costs per unit:|
|a. Costs per unit for last year||$ 9.76||= (390000+261000+235000+774000) / 170000|
|b. Costs per unit for this year||$ 11.99||= (374400+217152+188000+851400) / 136000|
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