Question

Trek Cycles estimates the production of the model X-1 will incur an overhead of 150,000 machine hours and cost $30,000. It takes 6 machine hours per bicycle, a direct material cost of $5 per bicycle, and direct labor of $5 per bicycle. What is the cost of each X-1 bicycle produced

Answer 1

Unitary cost= $11.2

Step-by-step explanation:

Giving the following information:

Estimated overhead= $30,000

Estimated machine-hours= 150,000

It takes 6 machine hours per bicycle, a direct material cost of $5 per bicycle, and direct labor of $5 per bicycle.

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 30,000/150,000

Predetermined manufacturing overhead rate= $0.2 per machine hour

Now, we can determine the unitary cost:

Unitary cost= 5 + 5 + 0.2*6= $11.2