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Direct Material Cost for Company A: leather and nylon collars

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In April 2005 Company A made (and sold) 1,200 leather collars and 2,400 nylon collars. Costs incurred in April 2005 are listed below:

Raw leather $1,800
Raw nylon 6,000
Buckles (one per collar) 2,700
Assembly line wages 10,800

All assembly line workers earn $15 / hour, but a leather collar takes twice as long to make as a nylon collar. The total cost of a leather collar is $11.00; a leather collar sells for $15.00. A nylon collar sells for $9.00. Any individual cost that comprises at least 5% of a product's total cost is considered direct.

For a nylon collar, the total direct material cost is:

My answer is $3.25 (7800/2400). Is it correct?

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Solution Summary

Given the information about raw material costs and assembly line wages, the solution calculates the direct material cost for one of two products.

Solution Preview

Please see the response to your posting as below:

Cost of buckle per collar = $2700/(1,200 leather collars + 2,400 nylon collars) ...

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