Fredrick Paulson Tie Co. manufactures neckties and scarves. Two overhead application bases are used; some overhead is applied on the basis of raw material cost at a rate of 150% of material cost, and the balance of the overhead is applied at the rate of $7.25 per direct labor hour. Required: Calculate the cost per unit of a production run of 540 neckties that required raw materials costing $2,110 and 69 direct labor hours at a total cost of $865. (Round your answer to 2 decimal places.)

Question

Business

Sawyer Ferrell

19 May, 08:22

Fredrick Paulson Tie Co. manufactures neckties and scarves. Two overhead application bases are used; some overhead is applied on the basis of raw material cost at a rate of 150% of material cost, and the balance of the overhead is applied at the rate of $7.25 per direct labor hour. Required: Calculate the cost per unit of a production run of 540 neckties that required raw materials costing $2,110 and 69 direct labor hours at a total cost of $865. (Round your answer to 2 decimal places.)

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Answers (1)

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Dillon Zuniga · Answer 1

Unitary cost = $12.30

Explanation:

Giving the following information:

Overhead rate:

Rate 1 = 150% of material costs

Rate 2 = $7.25 per direct labor hour.

Production:

540 neckties

raw materials = $2,110

Direct labor hours = 69 direct labor hours at a total cost of $865.

First, we need to calculate the total cost:

Total cost = 2,110 + 865 + (1.5*2,110 + 7.25*69)

Total cost = $6,640.25

Unitary cost = 6,640.25/540 = $12.30