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14 January, 05:09

The period manufacturing costs of a company is comprised of $2,000,000 in direct materials, $1,000,000 in direct labor, and $500,000 in overhead, resulting in 7,000 units of product. Manufacturing operations is consisted of two processes, machining and assembly. Machining takes up 40% of direct materials, 60% of direct labor, and 50% of overhead. Provide a hybrid manufacturing cost statement, containing combined activity based costing and process costing.

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  1. 14 January, 05:32
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    The Direct material cost per unit is = 285.714 per unit

    The Direct labor per unit is = 142.857 per unit

    The Overhead cost per unit is = 71.4285 per unit

    Explanation:

    Solution

    We recall that:

    The total direct material = $2000000

    The total direct labor = $1000000

    The units in products = 7000 units

    The total Overheads = $500000

    Now,

    The direct materials on machinery is = $ 800,000 (40%)

    The direct labor on machinery is = $ 600,000 (60 %)

    The machinery on overheard is = $ 250,000 (50 %)

    The direct materials on assembly is = $ 1200,000

    The Direct labor on assembly is = $ 400,000

    The Overhead on assembly is = $ 250,000

    Thus,

    The hybrid manufacturing cost statement is represented or shown below

    Particular Machinery (40%) in $ Assembly (60%) in $ Total in $

    Now,

    Particular = Direct material,

    Machinery (40%) in $ = 800000

    Assembly 60% in $ = 1200000

    Total in $ = 2000000

    Grand total = 1650000

    Particular = labor

    Machinery (40%) in $ = 600000

    Assembly 60% in $ = 400000

    Total in $ = 1000000

    Grand total = 1850000

    Particulars = Overhead

    Machinery (40%) in $ = 250000

    Assembly 60% in $ = 250000

    Total in $ = 500000

    Grand total = 3500000

    Thus,

    The Direct material cost per unit = 2000000/7000 = 285.714 per unit

    The Direct labor per unit = 1000000/700 = 142.857 per unit

    The Overhead cost per unit = 500000/7 = 71.4285 per unit
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