Question

Sith Corporation has the following budgeted product cost information for the year 3XX5. Practical capacity 12,800 machine hours Budgeted consumption 10,000 machine hours Direct materials $400,000 Direct labor (8,000 hours @ 11.00/hour) 88,000 Indirect labor 10,000 Plant facility rent 50,000 Depreciation on plant machinery and equipment 20,000 Assume the company can hire exactly the amount of direct labor necessary to operate the machines for the required number of hours given demand.

A. Calculate the planned utilization for the year 3XX5

B. Calculate the amount of direct labor cost that should be budgeted for planned utilization of 88%

C. Calculate the PDOR using budgeted direct labor hours as the allocation base

D. Calculate the PDOR using budgeted machine hours as the allocation base

E. Calculate the budgeted reported unit cost, assuming direct labor hours is the allocation base, for a cost object that requires 0.4 direct labor hours to complete and $2.00 dollars per unit of direct materials. Be sure to use the correct measure of consumption given the allocation base required for Part E.

Answer 1

Answer :

Indirect labor	$10,000.00
Plant rent	$50,000.00
Depreciation on P/M	$20,000.00
Budgeted factory overhead	$80,000.00
(A). Plant utilisation	78.13%
(B). Direct labor cost when planned utilisation is 88%	$99,123.20
(C). PDOR using direct labor hours
Budgeted factory overhead	$80,000.00
Direct labor hours	8000
PDOR	$10.00
(D). PDOR using Machine hours
Budgeted factory overhead	$80,000.00
Budgeted machine hours	10000
PDOR	$8.00
(E). Direct material	$2.00
Direct labor (0.4 * 11)	$4.40
Factory overhead (0.4 * 10)	$4.00
Unit cost	$10.40

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