controller to shave 5% or so off the estimated direct labor-hours every year. That way, we kept a reserve that usually resulted in a big boost to net operating income at the end of the fiscal year in December. We called it our Christmas bonus. Corporate headquarters always seemed as pleased as punch that we could pull off such a miracle at the end of the year. This system has worked well for many years, and I don’t want to change it now. Required: Assume the following information: Direct Materials $40 per unit Direct Labor $20 per unit Total Estimated Manufacturing Overhead $8,400,000
Manufacturing overhead is allocated based on estimated direct-labor hours. Each unit of product requires 1 direct labor hour.
1. Calculate the cost of one unit of product, assuming that the overhead per unit is based on Terri Ronson’s estimate of 440,000 hours. (Round all dollar figures to two decimal places.) a. If 441,000 units were produced, how much overhead was applied to work in process.