Question

Given the following information, compute the total number of units for the period: Direct labor hours 13,900 Direct labor cost $ 2.70 per hour Direct materials cost $ 75 per unit Total manufacturing cost $ 181,145 Fixed overhead cost $ 74,000 Variable overhead cost 50 % of total labor cost

Answer 1

Answer:

678  units

Explanation:

The total manufacturing cost is made of 2 categories of cost. These are the direct cost and the indirect/overhead costs. The direct cost includes direct material cost, direct labor etc. The overheads may be categorized into fixed and variable elements.

Given that  Direct labor hours 13,900 Direct labor cost $ 2.70 per hour and Variable overhead cost 50 % of total labor cost

Variable over head = 50% × (13,900 × $2.70)

= $18,765

Let the number of units be y

(13,900 × $2.70) + 75y + $74,000 + $18,765  = $181,145

75y = $181,145 - $74,000 - $18,765 - $37,530

75y = $50,850

y = $50,850 /75

y = 678

Answer 2

Answer: 678 units

Explanation:

To answer this we shall subtract the various cost components from the main figure.

The total cost is $181,145.

The total labor cost would be,

= Labor hours x rate

= 13,900 x 2.70 per hour

= $37,530

The variable cost is 50% of total labor so that would be,

= $37,350 x 0.5

= $18,765

The fixed overhead cost is given at $74,000

Subtracting these would be

= 181,145 - 37,530 - 18,765 - 74,000

= $50,850

This figure is the Direct materials cost. The last cost.

Now it says that Direct materials cost $75 per unit so we can get the no. of units by division.

= 50850/ 75

= 678 units.

The total number of units was 678.

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