. Abdur Rahmans company is planning to lounge a product for kids in coming Eidul Adha season. For the purpose of determining the product cost, the company has made the following assumptions:

Direct materials $5 per unit. Direct labor cost per hour is $10 and it takes 1.5 hours to make a single unit. The company estimated that 20,000 direct labor hours would be needed to support the production for the season. Estimates total fixed manufacturing overhead is $100,000 and variable manufacturing overhead per direct labor hour is $0.5. during the season, the actual manufacturing overhead of Abdur Rahmans company was $ 195,000 with a total of 25000 direct labor hours worked on jobs.

Instructions-

4a. Determine the product costs per unit for the new product.

4b. Mohammad has finished his year 12 successful and got chance at university of technology Sydney for bachelor of business. While doing his managerial accounting course, one thing he just can not work why he has to workout overhead ahead of time? his argument is, all the expenses are incurred, should be treated as direct cost rather than overhead costs. Please comment on his argument.