Question

The accounting records for Portland Products report the following manufacturing costs for the past year. Direct...

The accounting records for Portland Products report the following manufacturing costs for the past year.

Direct materials $ 390,000
Direct labor 261,000
Variable overhead 235,000

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.


Required:

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.

Business   Accounting   
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Answer #1
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Cost estimate for a volume level of 136,000 units:
Particulars Amounts Working/Calculations
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:
Particulars Amounts Working/Calculations
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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