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The accounting records for Portland Products report the following manufacturing costs for the past year: Direct...

The accounting records for Portland Products report the following manufacturing costs for the past year: Direct materials $ 330,000 Direct labor 265,000 Variable overhead 235,000 Production was 190,000 units. Fixed manufacturing overhead was $727,000. 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. Variable 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. (Do not round intermediate computations.)

b. Determine the costs per unit for last year and for this year. (Round your answers to 2 decimal places.)

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Expert Solution

Given data :
Past year Coming year
Production 190000 units 152000 units
DM 330000 20% increase
DL 265000 4% increase
VOH 235000 p.u remains same
FMOH 727000 10% increase
a. Cost estimate for a volume level of 152,000 units of product for the coming year:
Direct material cost = $330,000+($330,000*20%)
DMC                              = $396,000
Direct labour cost   = $265,000+($265,000*4%)
DLC                       = $275,600
Variable Overhead = ($235,000/190,000units)*152,000units
VOH Cost              =$188,000
Fixed Manufacturing Overhead= $727,000+($727,000*10%)
FOH Cost              =$799,700
b. Cost per unit last year:
DM $       3,30,000
DL $       2,65,000
VOH $       2,35,000
FMOH $       7,27,000
Total Cost $      15,57,000
Cost per unit = $1,557,000/190,000 units
= $              8.19
Cost per unit coming year:
DM $       3,96,000
DL $       2,75,600
VOH $       1,88,000
FMOH $       7,99,700
Total Cost $      16,59,300
Cost per unit = $1,659,300/152,000 units
= $            10.92

ekkarill92 answered 2 years ago
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