Question

Ware Manufacturing Company produced 2,000 units of inventory in January 2018. It expects to produce an additional 14,000 units during the remaining 11 months of the year. In other words, total production for 2018 is estimated to be 16,000 units. Direct materials and direct labor costs are $64 and $52 per unit, respectively. Ware expects to incur the following manufacturing overhead costs during the 2018 accounting period:
Production supplies $ 20,000
Supervisor salary 160,000
Depreciation on equipment 75,000
Utilities 20,000
Rental fee on manufacturing facilities 45,000
Required
a. Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units
b. Determine the cost of the 2,000 units of product made in January Complete this question by entering your answers in the tabs below.
Required A Required B
Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units Predetermined overhead rate per unit < Required A Required B >

Answer 1

Answer:

Total production cost= $266,380

Explanation:

First, we need to calculate the total estimated overhead costs:

total estimated overhead costs= 20,000 + 160,000 + 75,000 + 20,000

total estimated overhead costs= $275,000

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 275,000 / 16,000

Predetermined manufacturing overhead rate= $17.19 per unit

Finally, we can calculate the total production cost of the 2,000 units made in January:

Total production cost= total unitary cost*number of units

Total production cost= (64 + 52 + 17.19) * 2,000

Total production cost= $266,380