Question

In December, Sara's Sodas produced 4.0 million liters of the beverage. Manufacturing overhead was $1,435,000 and the cost per liter was $0.47. Labor costs were 25 percent of materials cost. Required: a. Calculate the materials cost for December.

Answer 1

Answer:

The material cost for December = $356,000

Step-by-step explanation:

The manufacturing overhead is the sum of the indirect costs that come from the manufacturing process except labor and materials

Hence, whereby the cost per liter = $0.47, we have;

Total volume produced = 4.0 million liters

Manufacturing overhead = $1,435,000

Total cost = Cost per liter × Total volume produced

∴ Total cost = 4 × 10⁶ × $0.47 = $1,880,000

Hence the cost of labor + materials = Total cost - Manufacturing overhead

the cost of labor + materials = $1,880,000 - $1,435,000 = $445,000

Labor cost = 25% material cost = 0.25 × material cost

∴ 0.25 × material cost + material cost = $445,000

1.25 × material cost = $445,000

material cost = $445,000/1.25 = $356,000

Which gives labor cost = 0.25 × $356,000 = $89,000

The material cost for December = $356,000.