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Del Mar Manufacturing applies factory overhead to its two products (L23 and L24) on the basis of direct labor hours. Estimated factory overhead and direct
Del Mar Manufacturing applies factory overhead to its two products (L23 and L24) on the basis of direct labor hours. Estimated factory overhead and direct labor time for the current accounting period are $400,000 and 10,000 hours, respectively. Information about the two products follows. L24 Estimated production volume Direct materials per unit Direct labor per unit 3 hours at $8 S hours at $8 L23 1000 S30 1.400 $19 24 40 The company has seen a significant decline in profit and believes that incorrect and "outdated" calculations of product cost are a major contributor to the problem. Del Mar's overhead can be identified with three major activities. These three activities and cost-driver data are summarized below, Purchase order processing Machine processing Inspection Cost $ 40,000 220,000 140.000 $400.000 1.23 300 4,500 250 L24 100 3,500 750 REQUIRED: a) Assume the use of direct labor hours to apply overhead to production, compute the cost per unit for L23 and L24
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