Question

Sheddon Industries produces two products. The products' identified costs are as follows: Product A Product B Direct materials $ 20,000 $ 15,000 Direct labor 12,000 24,000 The company's overhead costs of $54,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B?

Answer 1

Answer: $15

Explanation:

Given the following ;

Direct material cost for product B = $ 15,000

Direct labor cost for product B = $24,000

Direct labor for product A = $12,000

Allocated overhead based on direct labor cost = $54,000

Number of units of product B produced = 5000

Total product cost B = Direct labor cost of product B+ Direct material cost of product B+ overhead cost of product B

Overhead cost of product B based on direct labor cost = company's allocated overhead × (direct labor cost of product B ÷ Total direct labor cost of product A and B)

Total direct labor cost of product A and B = $12,000 + $24,000 = $36,000

Overhead cost of product B based on direct labor cost = $54,000 × ($24,000 / $36,000)

=$36,000

Total product cost B = $24,000 + $15,000 + $36,000 = $75,000

Therefore cost per unit if product B = Total costing of product B ÷ Number of units produced

= $75,000 ÷ 5000 = $15

Answer 2

Answer:

The cost per unit for product B is $ 15 per unit

Explanation:

Only Manufacturing Costs are used in Product Costing. Thus to find the Cost Per Unit of Product B, we Prepare a Manufacturing Cost Summary for Product B.

Step 1 Prepare a Manufacturing Cost Summary for Product B

Direct materials                                                                      $ 15,000

Direct labor                                                                             $24,000

Overhead costs($24,000/$36,000) × $54,000                   $36,000

Total Cost for Product B                                                        $75,000

Step 2 Calculate the Cost Per Unit for Product B

Cost Per Unit = Total Cost / Number of Units Produced

                       =  $75,000 / 5,000 units

                       = $ 15 per unit