Herbal Life Distributors Limited has the capacity to manufacture 1,000 capsules that goes through two production departments: processing and packaging. The processing department is machine intensive, while the packaging department is highly labour intensive. The company applies a mark-up of 20% on all products. The entity projects budgeted overheads and budgeted activity levels for both departments based on normal level of activities:

Departments

Budgeted overheads

Budgeted activity levels

Processing

$14,000,000

2,500,000 (machine hours)

Packaging

$ 6,000,000

1,500,000 (labour hours)

Selling and administration cost is 25% of total production cost. For the period the entity produced 1,000,000 units. The company used the 250,000 more direct labour hours than budgeted, but used 500,000 less machine hours actually than planned. Direct material incurred for the period is $ 10,750,000, while the actual labour rate is $25 on average.

Customers are will to pay a maximum of $75 for each unit of the product.

Required:

Calculate the total production cost to manufacture the capsules. (12 marks)

Calculate total cost of the capsules. (1 mark)

Calculate the selling price per capsule. (1 mark)

d. Calculate unit cost per capsule. (1mark)