Question

Stuart manufacturing company produced 1,600 units of inventory in January, Year 2. It expects to produce an additional 9,900 units during the remaining 11 months of the year. In other words, total production for Year 2 is estimated to be 11,500 units. Direct materials and direct labor costs are $65 and $61 per unit, respectively. Stuart expects to incur the following manufacturing overhead costs during the Year 2 accounting period. Production supplies: $5,900 Supervisor salary: $189,000 Depreciation on equipment: $125,000 Utilities: $33,000 Rental fee on manufacturing facilities: $239,350 A. Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units. (Round to 2 decimal places) Predetermined overhead rate: $___ per unit B. Determine the cost of the 1,600 units of product made in January. Indirect overhead costs: Direct materials: Direct labor:

Answer 1

The predetermined overhead rate for Stuart manufacturing company is $51.50 per unit, calculated by totaling the individual overhead costs and dividing by the number of units. The cost for the 1,600 units produced in January, including direct materials, direct labor, and overhead, amounts to $284,000.

Step-by-step explanation:

The student asks for help in combining manufacturing overhead costs into a single cost pool and calculating a predetermined overhead rate, based on the expected production of units for Year 2. Additionally, the student needs to determine the cost of the 1,600 units produced in January, considering direct materials and direct labor, as well as indirect overhead costs.

Calculating the Predetermined Overhead Rate

To calculate the predetermined overhead rate, we first need to combine the individual overhead costs into one pool. The total overhead costs are:

Depreciation on equipment: $125,000

Rental fee on manufacturing facilities: $239,350

Summing these costs, we get a total overhead of $592,250. Since the predetermined overhead rate is based on the number of units, we divide the total overhead by the estimated production of 11,500 units for Year 2.

Predetermined overhead rate = Total Overhead / Estimated Production

Predetermined overhead rate = $592,250 / 11,500

Predetermined overhead rate = $51.50 per unit (rounded to two decimal places)

Direct labor cost = 1,600 units x $61 per unit = $97,600

Overhead cost = 1,600 units x $51.50 per unit = $82,400

Thus, the total cost for the 1,600 units produced in January is the sum of these costs:

Total Cost = Direct Materials + Direct Labor + Overhead

Total Cost = $104,000 + $97,600 + $82,400

Total Cost = $284,000