Question

The accounting records for Frankie’s Fixtures report the following production costs for the past year:

Direct Materials	$	643,000
Direct Labor		553,000
Variable Overhead		473,000

Production was 238,000 units. Fixed manufacturing overhead was $797,000.

     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 248,000 units of product this year. (Do not round your intermediate computations. Round your final answers to nearest whole dollar amount.)

Cost item	This year cost
direct labor
variable overhead
fixed overhead
total cost

(b)

Determine the costs per unit for last year and for this year. (Round your answers to 2 decimal places.)

	cost per unit
last year
this year

Answer 1

a.

Prepare a cost estimate for a volume level of 248,000 units of product this year

Cost Item This Year's Cost

Direct materials $804,020 = 643000/238000*1.20* 248000

Direct labor $ 599,285 = 553000/238000*1.04* 248000

Variable overhead $492,874 = 473000/238000* 248000

Fixed overhead $876,700 = 797000*.10+797000

Total costs $2,772,879

b.Determine the costs per unit for last year and for this year

Costs Per Unit Last year $10.36 = total costs/238000

= 2,466,000 / 238000

This year $11.18 = total costs/248000

= 2,772,879/248000