Problem
Sherlock Company produces mathematical and financial calculators and operates at capacity. Data related to the two products are presented here:
|
Mathematical
|
Financial
|
|
Annual production in units
|
50,000
|
100,000
|
|
Direct material costs
|
$150,000
|
$300,000
|
|
Direct manufacturing labour costs
|
$50,000
|
$100,000
|
|
Direct manufacturing labour hours
|
2,500
|
5,000
|
|
Machine hours
|
25,000
|
50,000
|
|
Number of production runs
|
50
|
50
|
|
Inspection hours
|
1,000
|
500
|
Total manufacturing overhead costs are as follows:
Total
Machining costs $375,000
Set up costs $120,000
Inspection costs $105,000
1. Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product. 5 marks
2. Compute the manufacturing cost per unit for each product.