Question

In: Accounting

ABC company estimated that the cost of materials wil be $9500 and direct labour $20,000. Factory...

ABC company estimated that the cost of materials wil be $9500 and direct labour $20,000. Factory overheads is applied at $15 per direct labour hours in the moulding dept and at 150% of direct labor in finishing dept. it is estimated that 1600 direct labor hours will be required in moulding and that direct labor cost in finishing wil be $6300.
Calculate:
1.   Prime cost
2.   Conversion cost
3.   Cost to produce.

Expert Solution

1.

Direct materials = $9,500

Direct labor = $20,000

Prime cost = Direct materials+ Direct labor

= 9,500+20,000

= $29,500

2.

Factory overhead rate in moulding department = $15 per direct labor hour

Factory overhead rate in finishing department = 150% of direct labor cost

Direct labor hours used in moulding department = 1,600

Direct labor cost in finishing department = $6,300

Factory overhead applied in moulding department = Direct labor hours used in moulding department x Factory overhead rate in moulding department

= 1,600 x 15

= $24,000

Factory overhead applied in finishing department = Direct labor cost in finishing department x Factory overhead rate in finishing department

= 6,300 x 150%

= $9,450

Total factory overhead applied = Factory overhead applied in moulding department + Factory overhead applied in finishing department

= 24,000+9,450

= $33,450

Conversion cost = Direct labor + Total factory overhead applied

= 20,000+33,450

= $53,450

3.

Cost to produce = Direct materials + Direct labor + Total factory overhead applied

= 9,500+20,000+33,450

= $62,950

ekkarill92 answered 2 years ago

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