ABC Co produces three items: TV's, VCR's, and Stereos. They use a plant wide overhead rate based on machine hours. The following is available:
Product TV's VCR's Stereos
Units Produces 3000 2000 5000
Machine Hrs (assembly) 1 3 2
Machine Hours (packing) 1 1 1
Direct Labor hrs (per unit) 2 2 2
Direct Mat cost (per unit) $5.00 $45.00 $15.00
Direct labor wage rate is flat $20/hour with no overtime incurred. Also, total OH costs are $380,000 for assembly and $200,000 for packing. Calculate total product cost per stereo.
Total product cost consists of Direct Material, Direct Labor and Overhead
Overhead is applied based on machine hours.
We first calculate the predetermined overhead rate
Predetermined overhead rate = Total ...
The solution explains how to calculate the total product cost