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Each of the five (5) workers in a factory is being paid $250 per day. For...
Each of the five (5) workers in a factory is being paid $250 per day. For every unit produced in excess of 25 units in one day, a worker is paid $12. Fixed factory overhead per annum is $198,000 and there are approximately 330 working days in one year. Production data for July 6 and 7, 20C show the following number of units produced by each worker: July 6 = Cass - 25, Jen - 27, Owen - 24, Henry - 24, Miles - 28; July 7 = Cass - 26, Jen - 26, Owen - 28, Henry - 27, Miles - 26. What is the average direct labor cost per unit for the two-day period?
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Expert Solution
| Jul-06 | Jul-07 | ||||||||
| Units Produced | Units in Excess of 25 | Wages | Units Produced | Units in Excess of 25 | Wages | ||||
| Cass | 25 | - | $ 250.00 | Cass | 26 | 1 | $250 + (1*$12) = | $ 262.00 | |
| Jen | 27 | 2 | $250 + (2*$12) = | $ 274.00 | Jen | 26 | 1 | $250 + (1*$12) = | $ 262.00 |
| Owen | 24 | - | $ 250.00 | Owen | 28 | 3 | $250 + (3*$12) = | $ 286.00 | |
| Henry | 24 | - | $ 250.00 | Henry | 27 | 2 | $250 + (2*$12) = | $ 274.00 | |
| Miles | 28 | 3 | $250 + (3*$12) = | $ 286.00 | Miles | 26 | 1 | $250 + (1*$12) = | $ 262.00 |
| Total units | 128 | Total Wages | $ 1,310.00 | Total units | 133 | Total Wages | $ 1,346.00 |
Average direct labor cost per unit:
= Total Cost / Total Production
= ($1,310+$1,346) / (128+133)
= $2,656/261
= $10.176 per unit.
Note: Fixed Factory overhead will be considered in calculation of total cost of production and not in labour cost.
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