Question

The accounting records for Portland Products report the following manufacturing costs for the past year: Direct materials $ 315,000 Direct labor 262,500 Variable overhead 231,000 Production was 150,000 units. Fixed manufacturing overhead was $270,000. 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. (Do not round intermediate computations.)

Answer 1

Answer:

$1,002,600

Explanation:

The first step is to calculate the cost of each item for the current year

Direct materials= 315,000/150,000 × (20/100 + 1) × 120,000

= 2.1 × 1.20× 120,00

= $302,400

Direct labor= 262,500/150,000 × (4/100 +1) × 120,000

= 1.75 × 1.04 × 120,000

= $218,400

Variable overhead

= 231,000/150,000 × 120,000

= 1.54 × 120,000

= $184,800

Manufacturing overhead

= 270,000 × 10/100 + 270,000

= 270,000 × 0.1 + 270,000

= 27,000 + 270,000

= $297,000

Total costs= $302,400 + $218,400 + $184,800 + $297,000

= $1,002,600