Question

Capable Golf Cart, Inc. (CGC) manufactures two models of golf cart: LX and EX. The budget data for next month is available. LX EX Total Units produced 50 30 80 Direct labor hours 2,000 3,000 5,000 Machine hours 1,500 1,200 2,700 Direct materials $125,000 $90,000 $215,000 Direct labor 90,000 60,000 150,000 Manufacturing overhead 202,500 Total $567,500 Required: 1. Compute the reported unit cost for each product if direct labor hours are used as the allocation base. 2. Compute the reported unit cost for each product if direct labor costs are used as the allocation base. 3. Compute the reported unit cost for each product if machine hours are used as the allocation base.

Answer 1

1. Allocation on the basis of
`$\text{Direct labor hours}$`

LX EX

Direct Material 125000 90000

Direct
`$\text{labor}$` cost 90000 60000

Manufacturing overhead
`$81000$`
`$121500$`

(202500/5000 x 2000) (202500/5000 x 3000)

Total cost 296000 271500

Units produced 50 30

Cost per unit 5920 9050

2. Allocation on the basis of
`$\text{Direct labor costs}$`:

LX EX

Direct Material 125000 90000

Direct labor cost 90000 60000

Manufacturing overhead 121500 81000

(202500/150000 x 90000) (202500/150000 x 60000)

Total cost 336500 231000

Units produced 50 30

Cost per unit 6730 7700

3. Allocation on the basis of
`$\text{machine hours}$`

LX EX

Direct Material 125000 90000

Direct labor cost 90000 60000

Manufacturing overhead 112500 90000

(202500/2700 x 1500) (202500/2700 x 1200)

Total cost 327500 240000

Units produced 50 30

Cost per unit 6550 8000