A company uses a long-run time horizon to price its product, an electronic component used in aircraft.
Question:
A company uses a long-run time horizon to price its product, an electronic component used in aircraft. To produce a normal production run for a year of 100,000 units direct materials are $90,000; direct labour is $180,000; and, rent on leased equipment is $106,000 per year. Currently re-work is running at 4% of production, after testing. The company has the capacity to test 10 units per hour. Manufacturing Overhead has two cost drivers: testing (cost driver is testing hours at $2.50 per hour); and, rework (cost driver is units reworked at $80 per unit re-worked). Calculate current total manufacturing costs for 100,000 units. a. $721,000 b. $320,000 c. $401,000
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher