Question

In: Accounting

Deck Department Engine Department Direct materials 180,000 540,000 Direct labor 30,000 24,000 Manufacturing overhead 90,000 96,000...

Deck Department

Engine Department

Direct materials

180,000

540,000

Direct labor

30,000

24,000

Manufacturing overhead

90,000

96,000

a. Instructions

Compute the following per-unit costs for the month of May.

A deck assembly transferred to the Engine Department.

Assembling an engine and installing it.

A completed lawnmower.

Materials used in assembling a deck.

Direct labor cost of assembling and installing an engine.

b. Which of these unit costs would be most useful to management in evaluating the overall monthly efficiency of the Engine Department? Explain your reasoning.

Note: There was no manufacture units given.

Solutions

Expert Solution

a. Cost per unit = total cost incurred / total no. of units
1. Cost per unit of deck assembly = ($180000+30000+90000) / 6000 = $50 per unit

2. Cost per unit of Assembling an engine and installing = ($540000+24000+96000) / 6000 = $110 per unit

3. Cost per unit of completed lawnmower = Cost per unit of Deck Department + Cost per unit of Engine Department
= $50 + $110 = $160

4. Cost per unit of Material used in Deck = Material consumed / No. of units
= $180000 / 6000 units = $30

5. Direct labor cost of assembling and installing an engine = Direct labor cost incurred / No. of units
= $24,000 / 6000 units = $4

b. In evaluating the overall monthly efficiency of the engine department the management should be more concerned with the cost per unit of the Engine department ($110) because this cost reflects the overall costs incurred in that department and the management should try to reduce this cost so that the profit of the company are increased.

ekkarill92 answered 2 years ago
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