Welcome to the article Exercise 2 8 Static Applying Overhead Cost Computing Unit Product Cost LO2 2 LO2 3 Newhard Company assigns overhead cost to jobs on the basis. On this page, you will learn the essential and logical steps to better understand the topic being discussed. We hope the information provided helps you gain valuable insights and is easy to follow. Let’s begin the discussion!
Answer :
- Calculate the overhead cost: $\text{Overhead Cost} = 1.25 \times $12,000 = $15,000$.
- Determine the total manufacturing cost: $\text{Total Manufacturing Cost} = $10,000 + $12,000 + $15,000 = $37,000$.
- Compute the unit product cost: $\text{Unit Product Cost} = \frac{$37,000}{1,000} = $37$.
- The total manufacturing cost is $\boxed{$37,000}$ and the unit product cost is $\boxed{$37}$.
### Explanation
1. Problem Analysis
We are given the direct materials cost ($10,000), direct labor cost ($12,000), and the overhead rate (125% of direct labor cost). We need to find the total manufacturing cost and the unit product cost.
2. Calculating Overhead Cost
First, we calculate the overhead cost. The overhead cost is 125% of the direct labor cost, which is $12,000. So, the overhead cost is calculated as follows:
$$\text{Overhead Cost} = 1.25 \times \text{Direct Labor Cost} = 1.25 \times $12,000 = $15,000$$
3. Calculating Total Manufacturing Cost
Next, we calculate the total manufacturing cost. The total manufacturing cost is the sum of the direct materials cost, direct labor cost, and overhead cost. We have:
$$\text{Total Manufacturing Cost} = \text{Direct Materials Cost} + \text{Direct Labor Cost} + \text{Overhead Cost}$$
$$\text{Total Manufacturing Cost} = $10,000 + $12,000 + $15,000 = $37,000$$
4. Calculating Unit Product Cost
Finally, we calculate the unit product cost. The unit product cost is the total manufacturing cost divided by the number of units produced, which is 1,000. So, the unit product cost is calculated as follows:
$$\text{Unit Product Cost} = \frac{\text{Total Manufacturing Cost}}{\text{Number of Units}} = \frac{$37,000}{1,000} = $37$$
5. Final Answer
Therefore, the total manufacturing cost assigned to Job 313 is $37,000, and the unit product cost for Job 313 is $37.
### Examples
In manufacturing, understanding overhead costs is crucial for pricing products correctly. For example, if a company underestimates its overhead costs, it may set prices too low and lose money on each sale. Conversely, overestimating overhead costs can lead to prices that are too high, making the company less competitive. Accurately calculating and applying overhead costs, as demonstrated in this problem, helps businesses make informed decisions about pricing, production, and profitability.
- Determine the total manufacturing cost: $\text{Total Manufacturing Cost} = $10,000 + $12,000 + $15,000 = $37,000$.
- Compute the unit product cost: $\text{Unit Product Cost} = \frac{$37,000}{1,000} = $37$.
- The total manufacturing cost is $\boxed{$37,000}$ and the unit product cost is $\boxed{$37}$.
### Explanation
1. Problem Analysis
We are given the direct materials cost ($10,000), direct labor cost ($12,000), and the overhead rate (125% of direct labor cost). We need to find the total manufacturing cost and the unit product cost.
2. Calculating Overhead Cost
First, we calculate the overhead cost. The overhead cost is 125% of the direct labor cost, which is $12,000. So, the overhead cost is calculated as follows:
$$\text{Overhead Cost} = 1.25 \times \text{Direct Labor Cost} = 1.25 \times $12,000 = $15,000$$
3. Calculating Total Manufacturing Cost
Next, we calculate the total manufacturing cost. The total manufacturing cost is the sum of the direct materials cost, direct labor cost, and overhead cost. We have:
$$\text{Total Manufacturing Cost} = \text{Direct Materials Cost} + \text{Direct Labor Cost} + \text{Overhead Cost}$$
$$\text{Total Manufacturing Cost} = $10,000 + $12,000 + $15,000 = $37,000$$
4. Calculating Unit Product Cost
Finally, we calculate the unit product cost. The unit product cost is the total manufacturing cost divided by the number of units produced, which is 1,000. So, the unit product cost is calculated as follows:
$$\text{Unit Product Cost} = \frac{\text{Total Manufacturing Cost}}{\text{Number of Units}} = \frac{$37,000}{1,000} = $37$$
5. Final Answer
Therefore, the total manufacturing cost assigned to Job 313 is $37,000, and the unit product cost for Job 313 is $37.
### Examples
In manufacturing, understanding overhead costs is crucial for pricing products correctly. For example, if a company underestimates its overhead costs, it may set prices too low and lose money on each sale. Conversely, overestimating overhead costs can lead to prices that are too high, making the company less competitive. Accurately calculating and applying overhead costs, as demonstrated in this problem, helps businesses make informed decisions about pricing, production, and profitability.
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Rewritten by : Brahmana