Question

Thach Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $665,000, variable manufacturing overhead of $3.00 per machine-hour, and 70,000 machine-hours. Recently, Job T321 was completed with the following characteristics: Number of units in the job 30 Total machine-hours 90 Direct materials $ 630 Direct labor cost $ 2,880 The unit product cost for Job T321 is closest to:

A) $117.00
B) $58.50
C) $154.50
D) $51.50

Answer 1

Answer:

unit product cost is $154.50

option C is correct

Explanation:

Given data

fixed overhead cost = $665,000

variable overhead =70,000 @  $3.00 /machine hour = 3 × 700000 = $2100000

labor cost = $2,880

materials = $630

Number of units = 30

Total machine-hours = 90

to find out

unit product cost

solution

we know here variable cost and fixed overhead so

first we calculate total overhead that is

total overheads = Variable overheads + Fixed overheads  cost

put these value

total overheads = 2100000 +  665000

total overheads is $875000

so that overhead rate will be

overhead rate = ( 875000 / 70,000 )  

overhead rate is $12.5 / machine hour

and total product cost will be given by this formula that is

so, total product cost = Direct materials + Direct labors + Overheads

total product cost = 630 + 2880 + ( 12.5 × 90 )

total product cost is $4635

so that now we can say unit product cost will be

unit product cost = 4635 / 30

so  unit product cost is $154.50

hence option C is correct