Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June, 2012, Arabica completed job number 511. Job stats are as follows:
$$\begin{array} { l l }
\text { Direct materials cost } & \$ 27,500 \
\text { Direct labor cost } & \$ 13,000 \
\text { Direct labor hours } & 400 \text { hours } \
\text { Units of product produced: } & 200 \text { crates }
\end{array}$$
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How much was the cost per unit (cost per crate) of finished product? (Please round to the nearest cent.)

Question

Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June, 2012, Arabica completed job number 511. Job stats are as follows:
$$\begin{array} { l l } 
\text { Direct materials cost } & \$ 27,500 \
\text { Direct labor cost } & \$ 13,000 \
\text { Direct labor hours } & 400 \text { hours } \
\text { Units of product produced: } & 200 \text { crates }
\end{array}$$
- 
How much was the cost per unit (cost per crate) of finished product? (Please round to the nearest cent.)

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as $1,050,000 / $840,000 = 125% of direct labor cost. For job 511, the overhead is 125% of $13,000 = $16,250. Total cost for job 511 is $27,500 (materials) + $13,000 (labor) + $16,250 (overhead) = $56,750. Cost per unit is $56,750 / 200 crates = $283.75.

Arabica Manufacturing Company Uses a Predetermined Manufacturing Overhead Rate Based