Question

WellTech manufactures medical equipment. One of WellTech’s customers ordered 750 stethoscopes. In completing the order, WellTech incurred $3,625 in direct materials, and 750 direct labor hours at $23 per hour. WellTech applies overhead based on direct labor hours and the predetermined overhead rate is $33 per direct labor hour. What is the unit cost of each stethoscope produced (if necessary, round your answer)?

Answer 1

The following table explains the unit cost of each stethoscope produced:

1. Direct Materials cost is given in the question as $3,625.

2. It is given that there are 750 direct labor hours and it is charged as $23 per direct labor hour, to get the amount of direct labor hours the above figures are to be multiplied and we arrived at $17,250.

3. It is given that the overhead is applied based on direct labor hours and its predetermined rate is $33 and hence we got a overhead of $24,750.

4. We got a total cost of $45,625 for the entire 750 stethoscopes.

5. To know the unit cost of each stethosocope, we have divided the total cost of $45,625 by 750 stethoscopes and we got $60.83 or we can say $61.

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