Costing A Manufacturing Job (Full Absorption)
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Varsity Ltd. manufacturers various models of bicycles for both local and international customers. A normal customer order is for batches of 100 units. Overhead is applied based on direct labor hours. For the current year $540,000 total overhead is estimated, and the total direct labor hours is estimated to be 90,000. Job 252 is being completed for a local customer. This job currently has $7,600 in direct material attached to it and $15,675 in direct labor (labor costs are $16.50 per hour). Costs to complete the job include $3,200 in direct materials and 250 hours of direct labor.
Based on this information, what is the expected per unit cost for Job 252?
a. $306
b. $321
c. $360
d. $363
e. $378
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Solution Summary
Varsity Ltd. manufacturers various models of bicycles for both local and international customers. A normal customer order is for batches of 100 units. Overhead is applied based on direct labor hours. For the current year $540,000 total overhead is estimated, and the total direct labor hours is estimated to be 90,000. Job 252 is being completed for a local customer. This job currently has $7,600 in direct material attached to it and $15,675 in direct labor (labor costs are $16.50 per hour). Costs to complete the job include $3,200 in direct materials and 250 hours of direct labor.
Based on this information, what is the expected per unit cost for Job 252?
a. $306
b. $321
c. $360
d. $363
e. $378
Solution Preview
Here is the total cost:
Category Currently Expended Expected to be Expended Total
Direct Material $ 7,600 $ 3,200 $10,800
Direct Labor 15,675 4,125 (a) ...
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