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Since the cost per unit of PAR is above the target cost of $90, it is not earning the desired 10% return. The cost per unit of VEE is
below the target cost of $180, so it is earning a return greater than the desired rate. PROBLEM 19.2B
THE PARVEE COMPANY (continued)
c. Given that it takes 2 hours ($20 total labor cost per unit/$10 per hr. wage rate) to produce each unit of PAR
and 5 hours ($50 total labor cost per unit/$10 per hr. wage rate) to produce each unit of VEE, the total
expected labor PAR Ã—needed for the year are:
30,000 units of hours 2 hours per unit
+ 10,000 units of VEE Ã— 5 hours per unit If fixed overhead is allocated on the basis of direct labor hours, the allocation rate per hour is equal to $22.73
calculated as follows:
Allocation Rate
per Unit = Fixed Overhead
Total Direct
Labor Hours = = Total manufacturing cost per unit:
PAR VEE Direct materials cost per unit â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Direct labor cost per unit â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â...
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This note was uploaded on 03/13/2014 for the course ACCOUNTING 102 taught by Professor Foote during the Summer '12 term at Fullerton College.
 Summer '12
 Foote
 Managerial Accounting

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