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1. (2.5 points) Total manufacturing indirect maintenance costs are $100, and total indirect set-up costs are...

Question

1. (2.5 points) Total manufacturing indirect maintenance costs are $100, and total indirect set-up costs are...

1. (2.5 points) Total manufacturing indirect maintenance costs are $100, and total indirect set-up costs are $200. You produced and sold 10 units of product A and 6 units of product B. Product A uses 2 direct labor dollars per unit and 5 machine hours per unit, and product B uses 5 direct labor dollars per unit and 3 machine hours per unit. You allocate manufacturing maintenance costs based on direct labor dollars, and set-up costs based on the number of units.

What are the total indirect costs allocated to product A?

Answers

Manufacturing maintenance costs = Estimated total manufacturing maintenance costs / Estimated total direct labor dollars

Manufacturing maintenance costs = $100 / $50 [20(10*$2)+30(6*$5)] = $2 per direct labor dollar

Set up costs = Estimated set up costs / Estimated number of units

Set up costs = $200 / 16 = $12.5 per unit

Product A
Manufacturing maintenance costs (10*$2)*$2 $40
Set up costs (10*$12.5) 125
Total indirect costs $165


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