Question

A company is manufacturing building bricks and fire bricks. Both production require two processes. Brick forming and Heat treatment. The requirements for the two bricks are:

	Building Bricks	Fire Bricks
Forming per 100 bricks	3 hours	2 hours
Heating treatment per 100 bricks	2 hours	5 hours
Total cost of the two departments in one months were:
Forming	$ 21 200
Heat treatment	$ 48 800
Units produced during the month was:	130 000	70 000

Require:

Prepare statement of manufacturing costs for the two types of bricks.

Answer 1

1.1
The statement of manufacturing costs for the two types of bricks is prepared as below.
Statement Showing Manufacturing Costs of Building Bricks
Process	Time for 100 Units (Hours) [A]	Rate Per Hour ($) [B]	Cost Per 100 Units [A*B]	Cost for 130,000 Units
Brick Forming	3	4	$12	15,600 (130,000/100*12)
Heat Treatment	2	8	$16	20,800 (130,000/100*16)
			$28	$36,400
Statement Showing Manufacturing Costs of Fire Bricks
Process	Time for 100 Units (Hours) [A]	Rate Per Hour ($) [B]	Cost Per 100 Units [A*B]	Cost for 70,000 Units
Brick Forming	2	4	$8	5,600 (70,000/100*8)
Heat Treatment	5	8	$40	28,000 (70,000/100*40)
			$28	$33,600
Notes:
The rate per hour calculation is determined as follows:
Brick Forming:
Total Building Bricks Hours = (Building Bricks Produced during the Month*Number of Forming Hours Per 100 Bricks)/100 = (130,000*3)/100 = 3,900 hours
Total Fire Brick Hours = (Fire Bricks Produced during the Month*Number of Forming Hours Per 100 Bricks)/100 = (70,000*2)/100 = 1,400 hours
Total Hours Needed for Brick Forming = Total Building Brick Hours + Total Fire Brick Hours = 3,900 + 1,400 = 5,300 hours
Cost Per Hour of Brick Forming Department = Total Brick Forming Costs/Total Hours Needed for Brick Forming = 21,200/5,300 = $4 per hour
Heat Treatment:
Total Building Bricks Hours = (Building Bricks Produced during the Month*Number of Heat Treatment Hours Per 100 Bricks)/100 = (130,000*2)/100 = 2,600 hours
Total Fire Brick Hours = (Fire Bricks Produced during the Month*Number of Heat Treatment Hours Per 100 Bricks)/100 = (70,000*5)/100 = 3,500 hours
Total Hours Needed for Heat Treatment = Total Building Brick Hours + Total Fire Brick Hours = 2,600 + 3,500 = 6,100 hours
Cost Per Hour of Heat Treatment Department = Total Heat Treatment Costs/Total Hours Needed for Heat Treatment = 48,800/6,100 = $8 per hour