The following manufacturing costs were incurred by the Miracle Mile Company in 2019:
$$\begin{array} { l r }
\text { Direct materials } & \$ 225,000 \
\text { Direct labor } & 350,000 \
\text { Manufacturing overhead } & 470,000
\end{array}$$
These costs were incurred to produce 50,000 units of product. Variable manufacturing overhead was 70% of the direct materials cost.
In 2020, the direct material and variable overhead costs per unit will increase by 12%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 8%.
Required:
(a.) Prepare a cost estimate for an activity level of 40,000 units of product in 2020.
(b.) Determine the total product costs per unit for 2019 and 2020.

Question

The following manufacturing costs were incurred by the Miracle Mile Company in 2019:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 225,000 \
\text { Direct labor } & 350,000 \
\text { Manufacturing overhead } & 470,000
\end{array}$$ 
These costs were incurred to produce 50,000 units of product. Variable manufacturing overhead was 70% of the direct materials cost.
In 2020, the direct material and variable overhead costs per unit will increase by 12%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 8%.
Required:
(a.) Prepare a cost estimate for an activity level of 40,000 units of product in 2020.
(b.) Determine the total product costs per unit for 2019 and 2020.

Quizplus · Accepted Answer

The Answer of The following manufacturing costs were incurred by the Miracle Mile Company in 2019:
 $$\begin{array} { l r } 
\text { Direct materials } & \$ 225,000 \
\text { Direct labor } & 350,000 \
\text { Manufacturing overhead } & 470,000
\end{array}$$ 
These costs were incurred to produce 50,000 units of product. Variable manufacturing overhead was 70% of the direct materials cost.
In 2020, the direct material and variable overhead costs per unit will increase by 12%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 8%.
Required:
(a.) Prepare a cost estimate for an activity level of 40,000 units of product in 2020.
(b.) Determine the total product costs per unit for 2019 and 2020.

The Following Manufacturing Costs Were Incurred by the Miracle Mile