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The Cost to Produce One Tire and an Order

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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?

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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.

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