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The Cost to Produce One Tire and an Order

XYZ Tire Company has gotten an order for its manufacturing business segment of 25,000 tires. Using job order costing, figure out the total unit cost of manufacturing a tire and the total order.

Rubber in one tire: 8 pounds of rubber

Cost per pound of rubber: $1.50

Steel used in tire: 2 pounds of steel

Cost per pound of steel: $2.50

Payroll cost per hour: $15 per hour

Amount of time processing rubber: 5 minutes per pound of rubber

Amount of time molding and making tire: 20 minutes per tire

What is the product cost of producing one tire and the entire order?

Solution Preview

1. Compute the cost of rubber
Rubber in one tire 8 pounds
Cost per pound of rubber $1.50
Cost of rubber in one tire $12.00

2. Compute the cost of steel
Steel used in tire: 2 pounds
Cost per pound of steel: $2.50
Cost of steel in one tire $5.00

3. Compute the cost of processing the rubber
Amount of time processing rubber: ...

Solution Summary

This solution illustrates how to compute each component of a product cost, how to aggregate them to obtain a cost per unit, and how to use that information to obtain a cost for an entire order.

$2.19