Question
Santiago Manufacturing prices its products at full cost plus 40 percent. The company has two support departments and two production departments. Budgeted costs and normal
Santiago Manufacturing prices its products at full cost plus 40 percent. The company has two support departments and two production departments. Budgeted costs and normal activity levels are as follows:
Support Departments | Producing Departments | |||
A | B | C | D | |
Overhead costs | $20,000 | $50,000 | $90,000 | $120,000 |
Square feet | 2,000 | 2,400 | 4,000 | 12,000 |
Number of employees | 20 | 30 | 60 | 40 |
Direct labor hours | - | - | 10,000 | 6,400 |
Machine hours | - | - | 6,000 | 10,800 |
Support Department A's costs are distributed on a per square meter basis, while the costs of Support Department B are distributed by the number of employees. Department C uses working hours directly to assign overheads to products, while Department D uses machine hours. One of the company's products requires 4 direct labor hours per unit in Department C, and Department D' does not require time. The cost of direct materials for the product is $45 per unit and direct labor is $20 per unit. If the direct distribution method is used and the company follows the usual pricing policy, what would be the selling price of the product?
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