The Following Manufacturing Costs Were Incurred by the Trinitram Company

question 120

Essay

The following manufacturing costs were incurred by the Trinitram Company in 2019:
$$\begin{array} { l r } \text { Direct materials } & \$ 112,500 \\\text { Direct labor } & 175,000 \\\text { Manufacturing overhead } & 235,000\end{array}$$
These costs were incurred to produce 25,000 units of product. Variable manufacturing overhead was 80% of the direct materials cost.
In 2020, the direct material and variable overhead costs per unit will increase by 15%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 7.5%.
Required:
(a.) Prepare a cost estimate for an activity level of 20,000 units of product in 2020.
(b.) Determine the total product costs per unit for 2019 and 2020.

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Definitions:

Shipments

The process of transporting goods from one location to another.

Bullwhip Effect

The phenomenon in supply chain management where small fluctuations in demand at the retail level cause increasingly larger fluctuations in demand at the wholesale, distributor, and manufacturer levels.

Vertical Integration

Strategy of integrating the upstream part of the supply chain with the internal part, typically by purchasing upstream suppliers, so as to ensure timely availability of supplies.

Orders

Instructions or requests for someone to do something or for products, often in the context of business or military.