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The accounting records for Portland Products report the following manufacturing costs for the past year: Direct...

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Accounting

The accounting records for Portland Products report thefollowing manufacturing costs for the past year: Direct materials $360,000 Direct labor 268,000 Variable overhead 233,000 Productionwas 180,000 units. Fixed manufacturing overhead was $843,000. Forthe coming year, costs are expected to increase as follows: directmaterials costs by 20 percent, excluding any effect of volumechanges; direct labor by 4 percent; and fixed manufacturingoverhead by 10 percent. Variable manufacturing overhead per unit isexpected to remain the same. Required: a. Prepare a cost estimatefor a volume level of 144,000 units of product this year. (Do notround intermediate computations.) b. Determine the costs per unitfor last year and for this year. (Round your answers to 2 decimalplaces.)

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4.4 Ratings (833 Votes)

Working note

Statement of Cost

180000 Units

Per Unit (Cost/180000)

Direct material

$      360,000.00

$               2.00*

Direct Labor

$      268,000.00

$               1.49

Variable Overheads

$      233,000.00

$               1.29

Total variable Cost

$      861,000.00

$               4.78

Fixed cost

$      843,000.00

Total Cost

$ 1,704,000.00

*360000/180000

Change in Cost

Current

Change

Changed Cost

Direct material (per Unit)

$   2.00

(2+20%)

$   2.40

Direct Labor (Per unit)

$   1.49

(1.49+4%)

$ 1.55

Fixed manufacturing overheads (Total)

$                   843,000.00

(843000+10%)

$ 927,300.00

Cost Estimate

144000 Units

Working

Direct material

$     345,600.00

144000*2.4

Direct Labor

$     223,142.40

144000*1.55

Variable Overheads

$     186,400.00

$233000/180000x144000

Total variable Cost

$     755,142.40

Fixed cost

$     927,300.00

843000+10%

Total Cost

$ 1,682,442.40

Cost per Unit

Last year

This Year

(A)

Total Cost

$ 1,704,000.00

$ 1,682,442.40

(B)

Total Units

180000

144000

(A/B)

Cost per Unit

$ 9.47

$ 11.68

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