Nature's Best Milk
Nature's Best Milk produces dairy equipment. Most of its jobs have a number of units per job. The company has two different departments through which all jobs pass. Overhead is applied using a plantwide rate of $13 per direct labour hour. Direct labour wages average $8 an hour. Data for Job 3 for the year are as follows: $$\begin{array} { l r }
\text { Direct Materials } & \$ 50,000 \
\text { Direct Labour Costs } & \
\text { Dept. A } & 60,000 \
\text { Dept. B } & 12,000 \
\text { Machine hours used } & \
\text { Dept A } & 200 \
\text { Dept. B } & 2,400 \
\text { Units Produced } & 20,000
\end{array}$$
-Refer to Nature's Best Milk. What is the cost per unit?

Question

Nature's Best Milk
Nature's Best Milk produces dairy equipment. Most of its jobs have a number of units per job. The company has two different departments through which all jobs pass. Overhead is applied using a plantwide rate of $13 per direct labour hour. Direct labour wages average $8 an hour. Data for Job 3 for the year are as follows: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 50,000 \
\text { Direct Labour Costs } & \
\text { Dept. A } & 60,000 \
\text { Dept. B } & 12,000 \
\text { Machine hours used } & \
\text { Dept A } & 200 \
\text { Dept. B } & 2,400 \
\text { Units Produced } & 20,000
\end{array}$$
-Refer to Nature's Best Milk. What is the cost per unit?

Quizplus · Accepted Answer

The total cost includes direct materials, direct labor, and overhead. Direct labor cost is $72,000 ($60,000 + $12,000). Overhead is $13 per direct labor hour, and with $72,000 in labor costs at $8/hour, there are 9,000 labor hours. Overhead is $117,000 (9,000 hours x $13). Total cost is $239,000 ($50,000 + $72,000 + $117,000). Cost per unit is $11.95 ($239,000 / 20,000 units).

Nature's Best Milk Nature's Best Milk Produces Dairy Equipment -Refer to Nature's Best Milk

Nature's Best Milk
Nature's Best Milk Produces Dairy Equipment -Refer to Nature's Best Milk