Week 1 Workout Room Solutions - Chapter 2 - Cornerstone Exercise 2.1 1 Unit prime cost =(Direct materials Direct labor\/Units =($120,000 $60,000\/50,000 =

Week 1 Workout Room Solutions - Chapter 2 - Cornerstone...

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Cornerstone Exercise 2.1 1. Unit prime cost = (Direct materials + Direct labor)/Units = ($120,000 + $60,000)/50,000 = $3.60 2. Unit conversion cost = (Direct labor + Variable overhead + Fixed overhead)/Units = ($60,000 + $25,000 + $220,000)/50,000 = $6.10 3. Unit variable product cost = (Direct materials + Direct labor + Variable overhead)/Units = ($120,000 + $60,000 + $25,000)/50,000 = $4.10 4. Unit product cost = (Direct materials + Direct labor + Variable overhead + Fixed overhead)/Units = ($120,000 + $60,000 + $25,000 + $220,000)/50,000 = $8.50 5. Total direct materials, total direct labor, and total variable overhead would all increase by 10 percent since the units increased by 10 percent and these are strictly variable costs. Total fixed overhead would remain the same. Unit prime cost would increase by 10 percent since both direct materials and direct labor are strictly variable, and 10 percent more units would require 10 percent more variable cost. However, unit conversion cost would increase by less than 10 percent because of the presence of fixed costs. New unit product cost = [($120,000 + $60,000 + $25,000)(1.10) + $220,000)]/55,000 = $8.10
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Cornerstone Exercise 2.2 1. Pietro Frozen Foods, Inc.
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