Euro-Medi Plc manufactures a wide range of medical instruments. Two testing instruments (101 and 201) are produced

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Euro-Medi Plc manufactures a wide range of medical instruments. Two testing instruments (101 and 201) are produced at its highly automated Limerick plant. Data for December 2007 are as follows:
Euro-Medi Plc manufactures a wide range of medical instruments. Two

Manufacturing overhead is allocated to each instrument product on the basis of actual direct manufacturing labor-hours per unit for that month. Manufacturing overhead cost for December 2007 is ‚¬270 000. The production line at the Limerick plant is a machine paced one. Direct manufacturing labor is made up of costs paid to workers minimizing machine problems rather than actually operating the machines. The machines in this plant are operated by computer specialists and industrial engineers.
Required
1. Calculate the cost per unit in December 2007 for instrument 101 and instrument 201 under the existing cost accounting system.
2. The accountant at Euro-Medi proposes combining direct manufacturing labor costs and manufacturing overhead costs into a single conversion costs pool. These conversion costs would be allocated to each unit of product on the basis of direct materials costs. Calculate the cost per unit in December 2007 for instrument 101 and instrument 201 under the accountant's proposal.
3. What are the benefits of combining direct manufacturing labor costs and manufacturing overhead costs into a single conversion costs pool?

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Management and Cost Accounting

ISBN: 978-1405888202

4th edition

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

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