Question

EcoSkate makes skateboards from recycled plastic. For a recent job lot of 100 skateboards, the company incurred direct materials costs of $600 and direct labor costs of $200. Overhead is applied using a rate of 150% of direct materials costs.
Required:

a. What is the total manufacturing cost of this job lot?
b. What is the cost per skateboard?

Answer 1

Answer:

Total cost= $2,000

Unitary cost= 2 per unit

Explanation:

Giving the following information:

Lot=100 skateboards

Direct materials= $600

Direct labor costs= $200

Overhead is applied using a rate of 150% of direct materials costs.

To calculate the total cost, first, we need to allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 1.50*600= $900

Total cost= 900 + 200 + 900= $2,000

Unitary cost= total cost/number of units

Unitary cost= 2,000/100= $2 per unit