Alex Rodriguez, a product manager, provides you with the following data:
Number of units made...................................... 200,000
Labor hours per unit..................................... 24 minutes
Overhead per unit.............................................. $8.40
Alex also informs you that, under the current scheme, 70% of the firm's total overhead is allocated to his product.
Required:
a. What is the total overhead cost and the overhead rate per labor hour?
b. Suppose 50% of the overhead relates to labor. An additional 30% of overhead relates to batch-level costs; Alex's product consumes 45% of all batch-level activities. Of the product level costs (15% of total overhead), only $100,000 is traceable to Alex's product. The remaining 5% represents facility-level overhead costs. In light of this information, what is the overhead cost per unit for Alex's product?