EcoSkate makes skateboards from recycled plastic. For a recent job lot of 100 skateboards, the company incurred direct materials costs of $600 and direct labor costs of $200. Overhead is applied using a rate of 150% of direct materials costs.

Required:

a. What is the total manufacturing cost of this job lot?

b. What is the cost per skateboard?

Total cost = $2,000

Unitary cost = 2 per unit

Explanation:

Giving the following information:

Lot=100 skateboards

Direct materials = $600

Direct labor costs = $200

Overhead is applied using a rate of 150% of direct materials costs.

To calculate the total cost, first, we need to allocate overhead:

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 1.50*600 = $900

Total cost = 900 + 200 + 900 = $2,000

Unitary cost = total cost/number of units

Unitary cost = 2,000/100 = $2 per unit