13. product costing Ralph’s Firm manufactures and sells two products, code named A and B. The manufacturing process is relatively simple, with each product passing through the same set of machines and using the same labor force. For convenience, we might think of this as a manufacturing facility with a single department. The accounting system uses three types of cost pools: (i) direct labor, where the cost of any labor easily identified with a specific product is recorded; (ii) direct material, where the cost of any materials readily identified with a specific product is recorded; and (iii) overhead, where all other product costs are recorded in a single, aggregate pool.

The accounting for direct materials uses conventional inventory accounting procedures. For convenience, we assume the price paid suppliers for these items does not vary. In that way, we need not worry about LIFO, FIFO, or whatever in the direct material inventory accounts. (Alternatively, we could assume Ralph’s Firm uses

"just-in-time" inventory procedures with its suppliers.) In a similar vein, proper accrual procedures are used in recording the direct labor cost. Thus, direct labor cost in a particular period corresponds to direct labor input during that period, regardless of any lags in paying the employees. Finally, proper accrual procedures are also used in determining manufacturing overhead for any particular period. Included in this category are such things as insurance, property taxes, supervision, indirect manufacturing labor, fringe benefits for labor, miscellaneous materials, depreciation, and energy costs — all properly concerned with manufacturing operations.

During a recent period, the following was observed (and recorded):

product A product B units produced 1,200 4,800 direct material cost 6,500 3,500 direct labor cost 3,000 9,000 manufacturing overhead cost 45,000 What is the per unit manufacturing cost of A and of B? Determine your answer by allocating total manufacturing overhead on the basis of (i) units produced; (ii) direct material cost; (iii) direct labor cost;

and (iv) the total of direct material and direct labor cost.