Whaler utilizes automated machines to sew sails for its whaling ships.The manufacturing records indicate the Model Z7B sail uses $4,500 of fabric,requires 2 direct labor hours to finish and tie off threads and 5 hours of machine sewing time.The direct labor rate averages $12.50 per hour.Manufacturing overhead is added to the product cost of a sail based on a rate of $40 per machine hour.The company applies a 32% markup on cost.What is the sales price of a Model Z7B sail?

Question

Quizplus · Accepted Answer

Step 1: Calculate the total manufacturing cost
Direct materials cost = $4,500
Direct labor cost = 2 hours x $12.50/hour = $25
Manufacturing overhead cost = 5 hours x $40/hour = $200
Total manufacturing cost = $4,500 + $25 + $200 = $4,725

Step 2: Add markup
Markup amount = 32% x $4,725 = $1,512
Selling price = Total manufacturing cost + Markup amount = $4,725 + $1,512 = $6,237

Whaler Utilizes Automated Machines to Sew Sails for Its Whaling