Question

According to your accountant, each unit of Product X uses $54.32 of direct materials (DM) and $86.92 of manufacturing overhead (OH). How reliable are these numbers?

Answer 1

Answer:

approximately correct and reliable

Explanation:

Remember, product costing is a summation of the cost incurred from the manufacturing process.

Direct material usage of product X implies; the value of the parts that go directly into producing products.

While the Manufacturing overhead costs are the cost that are factory-related which are incurred when producing a product, such as the cost of machinery and the cost to operate the machinery.

If the total direct materials cost and the manufacturing overhead are known, then the accountant could estimate the fraction used by Product X.