Presley Products Inc. is a manufacturer of limited edition dolls. They use operations costing to measure and track the costs incurred for specific product lines. While most of the products do require some machine time, Presley has determined that direct labor hours drive its manufacturing overhead costs. During the month of April, the following data were available for a particular line of dolls: If total overhead costs during the month totaled $25,000 when a total of 50,000 direct labor hours were worked, what will be the total manufacturing cost for this line of dolls?

Question

Presley Products Inc. is a manufacturer of limited edition dolls. They use operations costing to measure and track the costs incurred for specific product lines. While most of the products do require some machine time, Presley has determined that direct labor hours drive its manufacturing overhead costs. During the month of April, the following data were available for a particular line of dolls:  If total overhead costs during the month totaled $25,000 when a total of 50,000 direct labor hours were worked, what will be the total manufacturing cost for this line of dolls?

Quizplus · Accepted Answer

To calculate the total manufacturing cost for this line of dolls, we need to first determine the predetermined overhead rate per direct labor hour.

Predetermined overhead rate = Total overhead costs / Total direct labor hours 
Predetermined overhead rate = $25,000 / 50,000 direct labor hours 
Predetermined overhead rate = $0.50 per direct labor hour

Next, we need to calculate the manufacturing cost for the line of dolls using the following formula:

Manufacturing cost = Direct materials + Direct labor + Manufacturing overhead

The data provided in the question only includes the manufacturing overhead cost, given as $22,500. We need to determine the direct materials and direct labor costs for the line of dolls in order to calculate the total manufacturing cost.

Therefore, we cannot choose options A or C, as they do not reflect this additional calculation.

Option B is also incorrect because it does not reflect the addition of direct materials and direct labor costs to the manufacturing overhead cost.

The correct answer is option D, which is the only choice that includes the additional calculation needed to determine the total manufacturing cost:

Manufacturing cost = Direct materials + Direct labor + Manufacturing overhead 
Manufacturing cost = $13,500 + $3,500 + $22,500 
Manufacturing cost = $39,500