Question

Howrley-David, Inc., manufactures two models of motorcycles: the Fatboy and the Screamer. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is the cost of materials. The following data are available for August:

	Fatboy			Screamer			Total
Number of units assembled		810			1,620			2,430
Materials cost per unit	$	2,200		$	3,200
Other costs:
Direct labor							$	2,332,800
Indirect materials								388,800
Other overhead								1,166,400

Required:

Howrley-David uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in August.

Answer 1

Material cost of Fatboy = Number of units x Material cost per unit

= 810 x 2200

= $1,782,000

Direct labor allocated to Fatboy = Total direct labor cost x Number of units of Fatboy / Total number of units

= 2,332,800 x 810/2,430

= $777,600

Material cost of Screamer= Number of units x Material cost per unit

= 1,620 x 3,200

= $5,184,000

Direct labor allocated to Screamer = Total direct labor cost x Number of units of Screamer/ Total number of units

= 2,332,800 x 1,620/2,430

= = $1,555,200

Indirect material allocated to Fatboy = Total indirect material cost x Number of units of Fatboy / Total number of units

= 388,800 x 810/2,430

= $129,600

Indirect material allocated to Screamer = Total indirect material cost x Number of units of Screamer / Total number of units

= 388,800 x 1,620/2,430

= $259,200

Other overhead  allocated to Fatboy = Total other overhead x Number of units of Fatboy / Total number of units

= 1,166,400 x 810/2,430

= $388,800

Other overhead  allocated to Screamer = Total other overhead x Number of units of Screamer / Total number of units

= 1,166,400 x 1,620/2,430

= $777,600

	Fatboy	Screamer	Total
Direct material	1,782,000	5,184,000	$6,966,000
Direct labor	777,600	1,555,200	$2,332,000
Indirect material	129,600	259,200	$388,800
Other overhead	388,800	777,600	$1,166,400