Q1. An order for 5000 units of Part 491 is received by the Diamonds & Spades Engineering Company. The raw material used for the production of part costs $1.5 per part. The basic manufacturing sequence, with standard operation times per part and machine overhead rates, is given below: Operation Cutting Milling Drilling Grinding Packaging Time per Part 3 min. 5 min. 4 min. 3 min. 0.3 min. Overhead Rate $1.20/hour 2.00/hour 1.70/hour 1.40/hour The direct labor hour per part is equal to the machine time per part (packaging is a manual operation only). The tooling cost for this job order is estimated to be $500. In addition to the tooling costs and machine overhead costs, factory overhead costs are $15 per direct labor hour. The average direct labor hour rate is $10 per hour. a. Assuming zero scrap rate during production, determine the total estimated costs for the job order of 5000 units. b. Determine the unit selling price if profit is to be 25% of the selling price.

Q1. An order for 5000 units of Part 491 is received by the Diamonds & Spades Engineering Company. The raw material used for the production of part costs $1.5 per part. The basic manufacturing sequence, with standard operation times per part and machine overhead rates, is given below: Operation Cutting Milling Drilling Grinding Packaging Time per Part 3 min. 5 min. 4 min. 3 min. 0.3 min. Overhead Rate $1.20/hour 2.00/hour 1.70/hour 1.40/hour The direct labor hour per part is equal to the machine time per part (packaging is a manual operation only). The tooling cost for this job order is estimated to be $500. In addition to the tooling costs and machine overhead costs, factory overhead costs are $15 per direct labor hour. The average direct labor hour rate is $10 per hour. a. Assuming zero scrap rate during production, determine the total estimated costs for the job order of 5000 units. b. Determine the unit selling price if profit is to be 25% of the selling price.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter5: Activity-based Costing And Management

Section: Chapter Questions

Problem 45E: Use the following information for Exercises 5-44 through 5-46: The following six situations at...

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Question

Q1. An order for 5000 units of Part 491 is received by the Diamonds & Spades Engineering
Company. The raw material used for the production of part costs $1.5 per part. The basic
manufacturing sequence, with standard operation times per part and machine overhead rates, is
given below:
Operation
Cutting
Milling
Drilling
Grinding
Packaging
Time per Part
3 min.
5 min.
4 min.
3 min.
0.3 min.
Overhead Rate
$1.20/hour
2.00/hour
1.70/hour
1.40/hour
The direct labor hour per part is equal to the machine time per part (packaging is a manual operation
only). The tooling cost for this job order is estimated to be $500. In addition to the tooling costs and
machine overhead costs, factory overhead costs are $15 per direct labor hour. The average direct
labor hour rate is $10 per hour.
a. Assuming zero scrap rate during production, determine the total estimated costs for the job
order of 5000 units.
b. Determine the unit selling price if profit is to be 25% of the selling price.

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