Marshall Co. produced a pilot run of forty units of a recently developed piston used in one of its products. Marshall expected to produce and sell 1,930 units annually. The pilot run required an average of 0.55 direct labor hours per piston for 40 pistons. Marshall experienced an sixty percent learning curve on the direct labor hours needed to produce new pistons. Past experience indicated that learning tends to cease by the time 640 pistons are produced.   Marshall's manufacturing costs for pistons are presented below.           Direct labor $ 17.00 per direct labor hour Variable overhead   13.00 per direct labor hour Fixed overhead   10.00 per direct labor hour Materials   4.00 per unit     Marshall received a quote of $10 per unit from Kytel Machine Co. for the additional 1,890 needed pistons. Marshall frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Kytel.   If the pistons are manufactured by Marshall Co., the total direct labor hours for the first 640 pistons (including the pilot run) produced is calculated to be (round to two digits after the decimal point): 57.44. 32.51. 39.09. 45.62. 42.35.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Marshall Co. produced a pilot run of forty units of a recently developed piston used in one of its products. Marshall expected to produce and sell 1,930 units annually. The pilot run required an average of 0.55 direct labor hours per piston for 40 pistons. Marshall experienced an sixty percent learning curve on the direct labor hours needed to produce new pistons. Past experience indicated that learning tends to cease by the time 640 pistons are produced.

 

Marshall's manufacturing costs for pistons are presented below.

 

       
Direct labor $ 17.00 per direct labor hour
Variable overhead   13.00 per direct labor hour
Fixed overhead   10.00 per direct labor hour
Materials   4.00 per unit
 

 

Marshall received a quote of $10 per unit from Kytel Machine Co. for the additional 1,890 needed pistons. Marshall frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Kytel.

 

If the pistons are manufactured by Marshall Co., the total direct labor hours for the first 640 pistons (including the pilot run) produced is calculated to be (round to two digits after the decimal point):

  • 57.44.

  • 32.51.

  • 39.09.

  • 45.62.

  • 42.35.

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