Question

Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow:

	Jerseys			Shorts			Total
Units produced		10,100			4,800			14,900
Machine-hours used		990			850			1,840
Direct labor-hours		210			140			350
Direct materials costs	$	11,300		$	8,800		$	20,100
Direct labor costs	$	4,200		$	2,800		$	7,000
Manufacturing overhead costs							$	23,309

Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows:

Account	Amount			Related to:
Utilities	$	3,940		Machine-hours
Supplies		2,790		Materials
Machine depreciation and maintenance		10,070		Machine-hours
Purchasing and storing materials		3,039		Materials
Miscellaneous		3,470		Machine-hours

Required:

a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs. (Round "Machine-related overhead" rate to 2 decimal places and "Materials related overhead" rate as a whole percentage (i.e., 32).)

Machine hours related: __________ per hour

Materials related: ___________%

b. Compute the total costs of production and the cost per unit for each of the two products for March. (Do not round intermediate calculations. Round your "Cost per unit" to 2 decimal places.)

Jersey | Shorts

Total costs:

Cost per unit:

Answer 1

a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.

Machine hours related = 17480/1840 = $9.50 per hour

Materials related = 5829*100/20100 = 29% of direct material

b) Calculate total cost of production

	Jersey	Shorts
Direct material	11300	8800
Direct labour	4200	2800
Overhead related to machine hour	9405	8075
Overhead related to material	3277	2552
Total Cost	28182	22227
Units	10100	4800
Cost per unit	2.79	4.63