Question

The accounting records for Portland Products report the following manufacturing costs for the past year. Direct materials Direct labor Variable overhead $ 340,000 268,000 237,000 Production was 170,000 units. Fixed manufacturing overhead was $813,000. ces For the coming year, costs are expected to increase as follows: direct materials costs by 20 percent, excluding any effect of vol changes, direct labor by 4 percent; and fixed manufacturing overhead by 10 percent. Variable manufacturing overhead per unit expected to remain the same. Required: a. Prepare a cost estimate for a volume level of 136,000 units of product this year, b. Determine the costs per unit for last year and for this year. Complete this question by entering your answers in the tabs below. Required A Required Prepare a cost estimate for a volume level of 136,000 units of product this yew (Do not found intermediate calculations.) Cost Item This Year's Cost Duct materia Dredt labor Prex 2017 II Next >

Answer 1

B). Calculation of cost per unit of last year and this year.
Last year :
Direct materials = $340,000 / 170,000 units = $2 per unit
Direct labor = $268,000 / 170,000 units = $1.5765 per unit rounded off.
Variable overhead = $237,000 / 170,000 = $1.3941 per unit rounded off.

Fixed manufacturing cost = $813,000 / 170,000 units = $4.78 per unit rounded off.

This Year:

Direct materials ($2 * 120%) = $2.4 per unit
Direct labor ($1.5765 * 104%) = $1.63956 per unit
Variable overhead = $1.3941 per unit rounded off.

Fixed manufacturing cost =( $813,000 * 110%) = $894,300

a). Cost estimate for this year:
Direct Material ($2.4 * 136,000 units) = $326,400
Direct labor ($1.63956 * 136,000 units) = $222,980.16
Variable overhead ($1.3941 * 136,000 units) = $189,597.60
Fixed overhead = $894,300
Totol cost = $1,633,277.76