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31 October, 03:29

Sheddon Industries produces two products. The products' identified costs are as follows:Product A-Direct materials $20,000-Direct labor $12,000Product B-Direct materials $15,000-Direct labor $24,000The company's overhead costs of $108,000 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?

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  1. 31 October, 03:32
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    The cost per unit for product B is: $22,72

    Explanation:

    Costs Product A:

    Direct materials $20,000

    Direct labor $12,000

    Units: 4000

    Costs Product B:

    Direct materials $15,000

    Direct labor $24,000

    Units: 5000

    Overhead Costs: $108000

    To allocate overhead costs based on direct labor, we need to find the coefficient to distribute the cost.

    Total direct labor = 12000+24000=36000

    Coefficient product A: 12000/36000 = 0,33

    Coefficient product B: 24000/36000 = 0,67

    Overhead costs Product A: 0.33*108000=35640

    Overhead costs Product B: 0,67*108000 = 72360

    Cost per unit product B: (Direct Material+Direct Labor+Overhead costs) / 5000

    Cost per unit product B = (15000+24000+72360) / 5000

    Cost per unit product B = $22,72
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