Question

Healthtech incorporated manufactures and sells diagnostic equipment used in the medical profession. its job costing system was designed using an activity-based costing approach. direct materials and direct labor costs are accumulated separately, along with information concerning four manufacturing overhead cost drivers (activities). assume that the direct labor rate is $16 per hour and that there were no beginning inventories. the following information was available for 2022, based on an expected production level of 633,333 units for the year: activity cost driver budgeted costs for 2022 cost driver used as allocation base cost allocation rate materials handling $ 3,100,000 number of parts used $ 2.75 per part milling and grinding 8,600,000 number of machine hours 11.50 per hour assembly and inspection 5,500,000 direct labor hours worked 6.50 per hour testing 1,900,000 number of units tested 3.00 per unit the following production, costs, and activities occurred during the month of april: units produced/tested direct materials costs number of parts used machine hours direct labor hours 54,000 $ 3,500,000 290,000 93,000 165,000 required: calculate the total manufacturing costs and the cost per unit produced and tested during the month of april for healthtech. note: round "cost per unit" to 2 decimal places.

Answer 1

The total manufacturing costs for HealthTech Incorporated in April are $9,241,500. This results in a cost per unit of approximately $171.14 when divided by the units produced and tested that month.

Step-by-step explanation:

To calculate the total manufacturing costs for HealthTech Incorporated in April, we’ll accumulate costs from direct materials, direct labor, and various activities as part of the activity-based costing approach. The cost drivers (activities) and their rates are given, which we will use to allocate overhead costs.

Firstly, for direct materials, the cost is already provided as $3,500,000. For direct labor, we multiply the number of hours worked (165,000) by the direct labor rate ($16/hour), giving a total of $2,640,000.

We then calculate the manufacturing overhead costs based on the cost drivers:

Materials handling: 290,000 parts × $2.75/part = $797,500

Milling and grinding: 93,000 machine hours × $11.50/hour = $1,069,500

Assembly and inspection: 165,000 labor hours × $6.50/hour = $1,072,500

Testing: 54,000 units tested × $3.00/unit = $162,000

The sum of all these costs equals the total manufacturing costs, which is $3,500,000 (direct materials) + $2,640,000 (direct labor) + $797,500 (materials handling) + $1,069,500 (milling and grinding) + $1,072,500 (assembly and inspection) + $162,000 (testing) = $9,241,500.

To find the cost per unit produced and tested, we take the total manufacturing cost of $9,241,500 and divide it by the number of units produced and tested, 54,000:

Cost per unit = $9,241,500 / 54,000 ≈ $171.14 (rounded to two decimal places)