Question

ErnieErnie 's

Electronics, Inc., delivered

1 comma 0001,000

custom-designed computer monitors to its customer,

Video ShackVideo Shack.

The following cost information was compiled in connection with this order:

Direct Materials Used

Part A327: 1 unit costing

$ 60

per monitor

Part B149: 1 unit costing

$ 120$120

per monitor

Direct Labor Used

Assembly:

66

hours per monitor at the rate of

$ 10

per hour

Inspection:

11

hour per monitor at the rate of

$ 12

per hour

In addition, the company applies manufacturing overhead costs to jobs at the rate of

$ 5

per direct labor hour. The selling price for each monitor is

$ 350

Requirements

(a) Determine the total cost for this job.

(b) Determine the gross margin per monitor.

Answer 1

Answer to Requirement a.

Direct Materials:

Cost per unit of Direct Materials used = $60 + $120 = $180

Cost of Direct Materials used = 1,000 Monitors * $180

Cost of Direct Materials used = $180,000

Direct Labor:

Number of Hours for Assembly = 1,000 Monitors * 6

Number of Hours for Assembly = 6,000 Hours

Direct Labor Cost for Assembly = 6,000 Hours * $10 = $60,000

Number of Hours for Inspection = 1,000 Monitors * 1 =1,000 Hours

Direct Labor Cost for Inspection = 1,000 Hours * $12 = $12,000

Total Direct Labor Cost = $60,000 + $12,000 = $72,000

Manufacturing Overhead:

Manufacturing Overhead Cost = (6,000 + 1,000) * $5

Manufacturing Overhead Cost = $35,000

Total Cost for Job = $180,000 + $72,000 + $35,000

Total Cost for Job = $287,000

Answer to Requirement b.

Gross Margin = Sales - Cost

Cost per monitor = $287,000 / 1,000 = $287

Gross Margin per Monitor = $350 - $287

Gross Margin per Monitor = $63