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Expected Unit Cost for a Product

Dolan Company manufactures product A that sells for $9.85 each. Forecasted sales for the coming year are 500,000 units that require 2 inspections per unit. They manufacture a second product, B, that has an expected run of 300,000 units, and requires 4 inspections per unit. The two products required the same amount of time on the factory floor during manufacture. Dolan Company has projected the following costs to support the expected sales for Product A:

Direct materials for A
$1,625,000

Direct labor for A
750,000

Overhead:
Unit level for A
675,000
Total Product level, to be allocated on number of inspections needed 825,000
Total Facility level, to be allocated on % of time on factory floor 400,000

What is Dolan's expected unit cost for Product A?

Solution Preview

Dolan Company manufactures product A that sells for $9.85 each. Forecasted sales for the coming year are 500,000 units that require 2 inspections per unit. They manufacture a second product, B that has an expected run of 300,000 units, and requires 4 inspections per unit. The two products required the same amount of time on the factory floor during manufacture. Dolan Company ...

Solution Summary

This solution calculates Dolan's expected unit cost for Product A using the total cost and units produced. All steps are shown with explanations.

$2.19