Question

The accounting records for Portland Products report the following manufacturing costs for the pest year. Direct materials $390,000 Direct labor 265,000 Variable overhead 236,000 Production was 190.000 units. Fixed manufacturing overhead was $724,000. For the coming year, costs are expected to increase as follows: direct materials costs by 20 percent, excluding any effect of volume changes; direct labor by 4 percent, and fixed manufacturing overhead by 10 percent. Veriable manufacturing overhead per unit is expected to remain the same. Required: a. Prepare a cost estimate for a volume level of 152.000 units of product this year. b. Determine the costs per unit for last year and for this year.

Answer 1

Answers

• Requirement [a]

Cost item	This year's cost
Direct material	$374,400
Direct Labor	$220,480
Variable Overhead	$188,800
Fixed Overhead	$796,400
Total Costs	$1,580,080

--Working

Cost item	This year's cost
Direct material	=+((390000/190000)*152000) + 20%
Direct Labor	=+((265000/190000)*152000) + 4%
Variable Overhead	=+(236000/190000)*152000
Fixed Overhead	=724000 + 10%

• [b]

	Cost per unit
Last Year	$8.50
This year	$10.40

--Working

	Cost per unit
Last Year	=+(390000+265000+236000+724000)/190000 units
This year	= $1580080/152000 units