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($1,237,275)/(288,369 last year's output) =
direct material alloy cost per piston.
team expects material costs to remain constant, this figure applies to Year One and Two.
FlexCon also spent $225,000 last year on other miscellaneous direct material.
additional direct material costs
Direct Labor Costs
Several methods are available to calculate direct labor costs given the information in the case.
The direct labor employed in the three work cells worked a total of 27,000 hours last year,
produced 288,329 pistons, and received $472,500 in direct salary.
$472,500 direct salary x 1.40 (add-in fringe benefits) = $661,500 total compensation
($661,500)/(288,369 previous year production) = $2.30 direct labor per unit
Year One: $2.30 x 1.03 (expected direct labor cost increase) =
Year Two: $2.37 x 1.03 (expected direct labor cost increase) =
Year One: $17.50 per hour compensation rate (see case for calculation) x 1.40 (fringes) x 1.03
(expected wage increase) = $25.23 (Year One total direct labor cost per hour)
(288,369 last year's production)/(27,000 last year's total direct hours) = 10.68 pistons per hour
300,000 (Year One expected production)/10.68 pistons per hour = 28,090 total required hours in
28,090 total required hours x $25.23 Year One total direct labor cost per hour = $708,710 total
Year One direct labor compensation
$708,710 (total Year One direct labor compensation)/300,000 (expected Year One production)
(difference from $2.37 due to rounding)