Knowledge Check
Bluebean Inc. produces two lines of coffee cups: espresso coffee cups and travel coffee mugs. The unit cost information is shown here. The company uses a traditional volume-based costing system and believes that the number of labor hours is the appropriate cost driver.
Activity Cost Pool | Espresso Coffee Cups | Travel Coffee Mugs | ||||
Selling price | $ | 20 | $ | 25 | ||
Direct materials | $ | 6 | $ | 8 | ||
Direct labor | $ | 2 | $ | 5 | ||
Units produced | 10,000 | units | 4,000 | units | ||
Direct labor hours | 10,000 | hours | 6,000 | hours | ||
Estimated total overhead costs | $ | 80,000 | ||||
Coffee Cups
Item #1 – Predetermined overhead rate | $5 per direct labor hour | $5 per direct labor hour |
Item #2 – Total manufacturing overhead allocated | $50,000 | $30,000 |
Item #3 – Manufacturing cost per unit | $13 | $20.50 |
Item #4 – Gross profit per unit |
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