The period manufacturing costs of a company is comprised of $2,000,000 in direct materials, $1,000,000 in direct labor, and $500,000 in overhead, resulting in 7,000 units of product. Manufacturing operations is consisted of two processes, machining and assembly. Machining takes up 40% of direct materials, 60% of direct labor, and 50% of overhead. Provide a hybrid manufacturing cost statement, containing combined activity based costing and process costing.

The Direct material cost per unit is = 285.714 per unit

The Direct labor per unit is = 142.857 per unit

The Overhead cost per unit is = 71.4285 per unit

Explanation:

Solution

We recall that:

The total direct material = $2000000

The total direct labor = $1000000

The units in products = 7000 units

The total Overheads = $500000

Now,

The direct materials on machinery is = $ 800,000 (40%)

The direct labor on machinery is = $ 600,000 (60 %)

The machinery on overheard is = $ 250,000 (50 %)

The direct materials on assembly is = $ 1200,000

The Direct labor on assembly is = $ 400,000

The Overhead on assembly is = $ 250,000

Thus,

The hybrid manufacturing cost statement is represented or shown below

Particular Machinery (40%) in $ Assembly (60%) in $ Total in $

Now,

Particular = Direct material,

Machinery (40%) in $ = 800000

Assembly 60% in $ = 1200000

Total in $ = 2000000

Grand total = 1650000

Particular = labor

Machinery (40%) in $ = 600000

Assembly 60% in $ = 400000

Total in $ = 1000000

Grand total = 1850000

Particulars = Overhead

Machinery (40%) in $ = 250000

Assembly 60% in $ = 250000

Total in $ = 500000

Grand total = 3500000

Thus,

The Direct material cost per unit = 2000000/7000 = 285.714 per unit

The Direct labor per unit = 1000000/700 = 142.857 per unit

The Overhead cost per unit = 500000/7 = 71.4285 per unit