Question

Howrley-David, Inc., manufactures two models of motorcycles: the Fatboy and the Screamer. Both models are assembled in the same plant and require the same assembling operations. The difference between the models is the cost of materials. The following data are available for August: Fatboy 780 2,600 Screamer 1,560 $ 3,600 2.340 $ Number of units assembled Materials cost per unit Other costs: Direct labor Indirect materials Other overhead $2,106,000 351,000 1,053,000 Required: Howrley-David uses operations costing and assigns conversion costs based on the number of units assembled. Compute the cost of each model assembled in August. Fatboy Screamer Total Operation cost Materials cost Total cost Number of units Unit cost

Answer 1

Solution 1:

Conversion cost per unit = (2106000+351000+1053000) / 2340 = $1500 per unit

	fatboy	Screamer	Total
Operation cost ($1500*number of units)	1170000	2340000	3510000
Materials cost (materials cost per unit*number of units)	2028000	5616000	7644000
Total cost	3198000	7956000	11154000
Number of units	780	1560	2340
Unit cost	4100	5100	9200

Solution 2:

Predetermined overhead rate = Total overhead costs / Total Direct labor hours

= $138450 / 3900

= $35.50 per Direct labor hour