Question

Yellow, Inc. manufactures teddy bears and dolls. Currently, Yellow makes 2,000 teddy bears each month. Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor. Yallow uses two activities in manufacturing the teddy bears: Sewing and Processing. The cost associated with Sewing is $15,000 a month, allocated on the basis of direct labor hours. The cost associated with Processing is $10,000 a month, allocated on the basis of batches. The activity drivers are used as follows:

Teddy Bears Dolls
Direct labor hours 200 200
Batches 35 65

Required:
What is the total manufacturing cost for one teddy bear?

Answer 1

The total manufacturing cost for one teddy bear is $8.

Total manufacturing cost

Total manufacturing cost for one teddy bear:

Total manufacturing cost=$2.00 + $0.50+ [($15,000× 1/2)/2,000] + [($10,000 × 35%)/2,000]

Total manufacturing cost=$2.00 + $0.50 + ($7,500/2,000) + ($3,500/2,000)

Total manufacturing cost=$2.00+ $0.50 + $3.75+ $1.75

Total manufacturing cost=$8

Therefore the total manufacturing cost for one teddy bear will be $8.

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