Carlyle Company
manufactures a single product.
P5-22 High-Low Method; Cost
of Goods Manufactured (LO1, LO3)
P5-22 Carlyle Company
manufactures a single product. The company keeps careful records of
manufacturing activities from which the following information has been
extracted:
|
|
Level
of Activity
| |
|
|
January–Low
|
April–High
|
|
Number of units
produced
|
12,000
|
15,000
|
|
Cost of goods
manufactured
|
$250,000
|
$300,000
|
|
Work in process inventory,
beginning
|
$5,000
|
$16,000
|
|
Work in process inventory,
ending
|
$6,000
|
$9,000
|
|
Direct materials cost per
unit
|
$4.00
|
$4.00
|
|
Direct labor cost per
unit
|
$8.00
|
$8.00
|
|
Manufacturing overhead
cost, total
|
?
|
?
|
The company’s manufacturing
overhead cost consists of both variable and fixed cost elements. To have data
available for planning, management wants to determine how much of the overhead
cost is variable with units produced and how much of it is fixed per
month.
Required:
1. For both January and
April, estimate the amount of manufacturing overhead cost added to production.
The company had no underapplied or overapplied overhead in either month. (Hint:
A useful way to proceed might be to construct a schedule of cost of goods
manufactured.)
2. Using the high-low
method, estimate a cost formula for manufacturing overhead. Express the variable
portion of the formula in terms of a variable rate per unit of
product.
3. If 13,500 units are
produced during a month, what would the cost of goods manufactured be? (Assume
that work in process inventories do not change and that overhead cost is neither
underapplied nor overapplied for the month.)
CHECK FIGURE: (2) $74,700 per month plus $9.90 per unit
SOLUTION PREVIEW
CARLYLE
COMPANY
Cost of Goods manufactured
(1)
|
|
January
Low
12,000
|
April
High
15,000
|
|
Direct materials cost @
$4.00 p.u.
|
$
48,000
|
$
60,000
|
|
Direct labor cost @ $8.00
p.u.
|
96,000
|
120,000
|
|
Manufacturing overhead
costs
|
107,000
|
113,000
|
File name: P5-22 CARLYLE COMPANY.xlxs File type: xlxs PRICE: $8
