The Cutting Edge Corporation manufactures drill bits for dentists' drills. Given modern eating habits, it is...

 

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The Cutting Edge Corporation manufactures drill bits for dentists' drills. Given modern eating habits, it is a healthy business. The Cutting Edge manufactures two drill bits: Bit 101 (The Mighty Chopper) and Bit 102 (The Nerve-grater). The total manufacturing overhead is estimated to be $1,020,000 per annum. Recently, the company has received two orders for its drill bits - one order for 20,000 units of Bit 101 and one order for 10,000 units of Bit 102. The following information has been identified relating to the two recent orders: Direct labour hours Raw material cost Hours in design department Production runs needed. Machine hours Bit 101 42 hours $40,000 10 2 24 Bit 102 21 hours $35,000 25 4 20 Required: The Cutting Edge uses an absorption costing system with the manufacturing overhead allocated on the basis of direct labour hours. The direct labour hour budget is 4,000 hours. 1) Calculate the manufacturing overhead allocation rate per direct labour hour. (1 mark) 2) Calculate the total manufacturing overhead cost that would be allocated to the recent order for Bit 101 and Bit 102 under the absorption system. (1 mark) 3) Calculate the manufacturing overhead cost per drill bit 101 and 102 in each order. (1 mark) The Cutting Edge Corporation manufactures drill bits for dentists' drills. Given modern eating habits, it is a healthy business. The Cutting Edge manufactures two drill bits: Bit 101 (The Mighty Chopper) and Bit 102 (The Nerve-grater). The total manufacturing overhead is estimated to be $1,020,000 per annum. Recently, the company has received two orders for its drill bits - one order for 20,000 units of Bit 101 and one order for 10,000 units of Bit 102. The following information has been identified relating to the two recent orders: Direct labour hours Raw material cost Hours in design department Production runs needed. Machine hours Bit 101 42 hours $40,000 10 2 24 Bit 102 21 hours $35,000 25 4 20 Required: The Cutting Edge uses an absorption costing system with the manufacturing overhead allocated on the basis of direct labour hours. The direct labour hour budget is 4,000 hours. 1) Calculate the manufacturing overhead allocation rate per direct labour hour. (1 mark) 2) Calculate the total manufacturing overhead cost that would be allocated to the recent order for Bit 101 and Bit 102 under the absorption system. (1 mark) 3) Calculate the manufacturing overhead cost per drill bit 101 and 102 in each order. (1 mark)

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