•Company produces two products. Both are made with the same machines, the needed hours are showed...
•Company produces two products. Both are made with the same machines, the needed hours are showed in the table.
•Company’s indirect costs are 45 000 € / year.
|
Product A |
Product B |
|
|
Production amount |
250 pieces/year |
7000 pieces/year |
|
Machine hours |
3 h/piece |
3 h/piece |
|
Working hours |
5 h/piece |
5 h/piece |
a)Divide indirect costs to Product A and Product B (€/year)
b)Calculate indirect costs/piece for Product A and Product B
Homework Answers
| a) | Since both products take same time per unit to produce | ||||||||
| we can directly divide indirect cost on the basis of the number of pieces produced during the year | |||||||||
| Therefore, | |||||||||
| Indirect Cost for product A = 45000/7250 Pieces * 250 pieces | |||||||||
| = | $ 1,551.72 | ||||||||
| Indirect Cost For Product B = 45000/7250 Pieces *7000 Pieces | |||||||||
| = | $ 43,448.28 | ||||||||
| b) | Indirect Cost Per Piece | ||||||||
| Product A = $1551.72/250 Pieces | |||||||||
| = | $ 6.207 | ||||||||
| Product B= | $43448.28/7000 | ||||||||
| = | $ 6.207 | ||||||||
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