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Problem 3 Nurally, Inc. manufactures a single product. Selected data from the company's cost records for two recent months are given below: LEVEL OF
Problem 3 Nurally, Inc. manufactures a single product. Selected data from the company's cost records for two recent months are given below: LEVEL OF ACTIVITY I Number of units produced July - Low October - High 9.000 Cost of goods manufactured $285,000 12,000 $390,000 Work in process inventory, beginning 14,000 22,000 Work in process inventory, ending 25,000 15,000 Direct materials cost per unit 15. 15 Direct labour cost per unit Manufacturing overhead cost, total 62 6 ? The company's manufacturing overhead cost consists of both variable and fixed cost elements. To have data available for planning, management wants to determine how much of the overhead cost is variable with units produced and how much of it is fixed per year. Required: 1. For both July and October, estimate the amount of manufacturing overhead cost added to production. The company had no under-applied or over-applied overhead in either month. (Hint: Construct a schedule of cost of goods manufactured.) 2. Using the high-low method, estimate a cost formula for manufacturing overhead. Express the variable portion of the formula in terms of a variable rate per unit of product. 3. If 9,500 units are produced during a month, what will the cost of goods manufactured be? (Assume that the company's beginning work in process Inventory for the month is $16,000 and that it's ending work in process inventory is $19,000. Also assume that there is no under-applied or over-applied overhead cost for the month.)
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