Silver Company manufactures a product that is available in both a complex model and a regular model. The company has manufactured the regular model for years. The complex model was introduced several years ago to tap a new segment of the market. Since introduction of the complex model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the complex model have been increasing rapidly. Manufacturing overhead is assigned to products on the basis of direct labour- hours. For the current year, the company has estimated that it will incur £900,000 in manufacturing overhead cost and produce 5,000 units of the complex model and 40,000 units of the regular model. The complex model requires two hours of direct labour time per unit, and the regular model requires one hour. Material and labour costs per unit are as follows: Model Complex Regular Direct material £40 £25 Direct labour 14 7 Required: a. Using direct labour-hours as the base for assigning overhead cost to products, compute the predetermined overhead rate. Using this rate and other data from the problem, determine the unit product cost of each model.

Silver Company manufactures a product that is available in both a complex model and a regular model. The company has manufactured the regular model for years. The complex model was introduced several years ago to tap a new segment of the market. Since introduction of the complex model, the company's profits have steadily declined and management has become increasingly concerned about the accuracy of its costing system. Sales of the complex model have been increasing rapidly. Manufacturing overhead is assigned to products on the basis of direct labour- hours. For the current year, the company has estimated that it will incur £900,000 in manufacturing overhead cost and produce 5,000 units of the complex model and 40,000 units of the regular model. The complex model requires two hours of direct labour time per unit, and the regular model requires one hour. Material and labour costs per unit are as follows: Model Complex Regular Direct material £40 £25 Direct labour 14 7 Required: a. Using direct labour-hours as the base for assigning overhead cost to products, compute the predetermined overhead rate. Using this rate and other data from the problem, determine the unit product cost of each model.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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