Question

Safe-Haul manufactures custom trailer equipment. In June, the company built 400 utility trailers for Cole’s Trailer Sales. Assembly of these units required 1,200 hours of direct labor at a cost of $30,000, direct materials costing $333,000, and 600 hours of machine time. Based on an analysis of overhead costs at the beginning of the year, overhead is applied to utility trailer jobs using the following formula.

Overhead = 150% of Direct Labor Cost + $120 per Machine Hour

a. Compute the total amount of overhead cost applied to the 400 utility trailers.

b. Compute the per-unit cost of manufacturing each trailer in this particular job.

f. Compute the total gross profit that will result from manufacturing these trailers for Cole’s Trailer Sales at a selling price of $2,100 apiece.

Answer 1

Req a.
Overheads applied = 150% of $ 30000+ $ 120 per MH for 600 MH
		45,000 + 72,000 = 117,000
Cost per unit:
Material cost		3,33,000
Labour cost		30,000
Overheads applied		1,17,000
Total cost			4,80,000
Divide: Units produced	400
Unit cost			1200
Total Gross Profit:
Sales revenue	(400*2100)	840000
Less: Total cost			4,80,000
Total Gross Profit:			3,60,000