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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 $ 310,000
Direct labor 269,000
Variable overhead 233,000

Production was 150,000 units. Fixed manufacturing overhead was $819,000.

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 120,000 units of product this year.
b. Determine the costs per unit for last year and for this year.

Solutions

Expert Solution

Requirement a

Direct material $      297,600.00
Direct labor $      223,808.00
Variable overhead $      186,400.00
Fixed manufacturing overhead $      900,900.00
Total cost for 120,000 Units $ 1,608,708.00

Working

Direct material $      297,600.00 (310000/150000*120000)*120%
Direct labor $      223,808.00 (269000/150000*120000)*104%
Variable overhead $      186,400.00 (233000/150000*120000)
Fixed manufacturing overhead $      900,900.00 (819000*110%)
Total cost for 120,000 Units $ 1,608,708.00

Requirement b

Unit cost = $10.87 for last year and $13.41 for this year

Working

Last year This year
Direct material $      310,000.00 $     297,600.00
Direct labor $      269,000.00 $     223,808.00
Variable overhead $      233,000.00 $     186,400.00
Fixed manufacturing overhead $      819,000.00 $     900,900.00
Total cost for 150,000 Units $ 1,631,000.00 $ 1,608,708.00
Units produced 150000 120000
Unit cost $                10.87 $               13.41

ekkarill92 answered 1 year ago
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