Kula Company Ltd manufactures two products, Flora and Fauna. Estimates for the company's products for next year
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Question:
- Kula Company Ltd manufactures two products, Flora and Fauna. Estimates for the company's products for next year are provided below:
Flora | Fauna | |
Estimated production volume | 3 000 | 4 000 |
Direct material cost | $60 / unit | $90 / unit |
Direct labour per unit | 3 hours @ $25 / hour | 4 hours @ $25 / hour |
Kula's estimated overhead of $1 500 000 can be identified with three major activities: order processing ($280 000), machine processing ($1 020 000) and product inspection ($200 000). These activities are driven by the number of orders processed, machine hours, and inspection hours, respectively.
Estimated activity levels for the next year are as follows:
Flora | Fauna | Total | |
Orders processed | 500 | 300 | 800 |
Machine hours | 39 000 | 46 000 | 85 000 |
Inspection hours | 7 000 | 18 000 | 25 000 |
Required:
Assuming that Kula Company Ltd uses activity-based costing to apply overhead to production, calculate the unit manufacturing costs of the Flora and Fauna products if the estimated manufacturing volume is attained.
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