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Manning Company produces 3 products and uses the job order method to determine unit costs. Manning uses direct labor hours as a base to
Manning Company produces 3 products and uses the job order method to determine unit costs. Manning uses direct labor hours as a base to allocate overhead. The following beginning of the year estimates are known: Total manufacturing overhead Total units produced (all 3 products) Total direct labor hours Total direct labor cost Total direct material cost Total machine hours $1,100,000 100,000 100,000 $1,120,000 $2,000,000 50,000 The following end of the year results are also known: Product1 Product2 Product3 Total Direct labor hours 50,000 30,000 35,000 115,000 Direct labor costs $600,000 $200,000 $400,000 $1,200,000 Direct materials costs $700,000 $800,000 $600,000 $2,100,000 Manufacturing overhead $1,050,000 Total units produced 41,000 29,000 35,000 105,000 Machine hours 13,000 22,000 13,000 48,000 1. Calculate the cost per unit of each product. 2. At this stage, is manufacturing overhead under or over applied (and by how much)? If all three products sell at a market determined price of $55, what strategy would you recommend?
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