Sherman,Inc.manufactures chainsaws that sell for $58.Each chainsaw uses $10 in direct materials and $3 in direct labor per unit.Sherman has two activities: Machining,which is applied at the rate of $2 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Sherman made 200 chainsaws,using 1,000 machine hours in 40 batches.What is the total manufacturing cost for one chainsaw?
A)$13
B)$14
C)$27
D)$30

Question

Quizplus · Accepted Answer

Direct materials cost per unit = $10
Direct labor cost per unit = $3
Machining cost per unit = (2/1000) x 100 = $0.002 per machine hour x 500 machine hours = $1
Finishing cost per unit = (20/40) x 1 = $0.5 per batch x 40 batches = $20
Total cost per unit = Direct materials cost per unit + Direct labor cost per unit + Machining cost per unit + Finishing cost per unit
Total cost per unit = $10 + $3 + $1 + $20
Total cost per unit = $34
However, the selling price per unit is $58.
Therefore, the profit per unit = Selling price per unit - Total cost per unit
Profit per unit = $58 - $34 = $24
Hence, the total manufacturing cost for one chainsaw = Direct materials cost per unit + Direct labor cost per unit + Machining cost per unit + Finishing cost per unit
Total manufacturing cost for one chainsaw = $10 + $3 + $1 + $20 = $34. Therefore, the best choice is C.