Sand makes up about 85% of the weight of the finished product, and is the only material | |
treated as a direct material. All other materials are treated as indirect, and thus part of | |
manufacturing overhead. There are 19,300 grams of sand in one finished goods unit (case), |
but not all sand purchased makes it into the finished product. Waste and scrap in the normal |
manufacturing process results in approximately 4% of the sand purchased being lost. | |
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Sand is purchased by the metric ton (one million grams). The cost from Sharpe's main | |
supplier is $9.95 per metric ton, shipped locally at a cost to Sharpe of $18.05 per metric ton. |
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Direct labor | | | | | | | |
Each case is expected to require 0.46 direct labor hours to complete. This amount comes |
from process analysis at Sharpe, and does not include setup and down time, which are | |
expected to average 0.01 hours per case. | | | | | |
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Sharpe pays its direct laborers an hourly wage of $17.00. Payroll taxes and benefits average |
$5.15 per direct labor hour. | | | | | | |
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Manufacturing overhead | | | | | | |
Sharpe uses a traditional costing system and allocates overhead on the basis of standard | |
direct labor hours. There are $386,000 of overhead costs expected in 2022, and 2022's unit |
sales are budgeted at 45,000 cases. | | | | | |
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JANUARY 2022 RESULTS | | | | | | |
In January, 2022, sales were $114,400 on 4,300 units sold. | | | |
85 metric tons of sand were purchased and used at a total cost, including shipping, of $2,200. |
Actual direct labor costs were $45,200, and actual direct labor hours were 1,960. | |
Actual overhead costs were $31,900. | | | | | |
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