Question

5) (5 points) Stampout Plastics produces different kinds of products, all in one manufacturing facility. They have identified four activities for their costing system: Materials management-allocated by number of purchase orders Chemical processing-allocated on metric tons Molding--allocated on direct labor hours Packaging-allocated by number of units produced The activity rates are as follows: Materials management Chemical processing Molding Packaging $12.00 $7.50 $24.00 $0.10 Per purchase order Per metric ton Per direct labor hour Per unit Engineering design shows that the order will require direct materials that cost $540, direct labor cost will be $90. The order will also require four purchase orders to be placed, use two metric tons of chemical base, and need eight direct labor hours. The size of the order is to produce 3,000 units of product. Calculate the total production of the order.

Answer 1

Activity	Activity rate	Activity used	Activity cost
Materials management	$12 per purchase order	4 purchase orders	12 x 4 = 48
Chemical processing	$7.50 per metric ton	2 metric tons	7.50 x 2 = 15
Molding	$24 per direct labor hour	8 direct labor hours	24 x 8 = 192
Packaging	$0.10 per unit	3,000 units	0.10 x 3,000 = 300

Calculation of total production cost of the order

Direct materials	540
Direct labor	90
Materials management overhead	48
Chemical processing overhead	15
Molding overhead	192
Packaging overhead	300
Total production cost	$1,185

Total production cost of the order = $1,185

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