Mogoul Manufacturing Company makes two different products, M and N. The company’s two departments are named after the products; for example, Product M is made in Department M. Mogoul’s accountant has identified the following annual costs associated with these two products.

Financial data

Salary of vice president of production division ......$200,000

Salary of supervisor Department M ......... 80,000

Salary of supervisor Department N ......... 60,000

Direct materials cost Department M .......... 300,000

Direct materials cost Department N ......... 420,000

Direct labor cost Department M ........... 240,000

Direct labor cost Department N ........... 680,000

Direct utilities cost Department M .......... 120,000

Direct utilities cost Department N ........... 24,000

General factorywide utilities ............. 36,000

Production supplies ............... 36,000

Fringe benefits ................. 138,000

Depreciation ................... 720,000

Nonfinancial data

Machine hours Department M ........... 5,000

Machine hours Department N ........... 1,000

Required

a. Identify the costs that are (1) direct costs of Department M, (2) direct costs of Department N, and (3) indirect costs.

b. Select the appropriate cost drivers for the indirect costs and allocate these costs to Departments M and N.

c. Determine the total estimated cost of the products made in Departments M and N. Assume that Mogoul produced 2,000 units of Product M and 4,000 units of Product N during the year. If Mogoul prices its products at cost plus 40 percent of cost, what price per unit must it charge for Product M and for Product N?