Parr Corporation Makes Three Products,X,Y,and Z Parr Uses Direct Labor Hours as the Cost Driver to Coming

question 118

Essay

Parr Corporation makes three products,X,Y,and Z.Expected overhead costs for the coming year include:
$$\begin{array} { l r } \text { Depreciation on factory building } & \$ 140,000 \\\text { Factory utility costs } & 160,000 \\\text { Supervisory salaries } & 250,000 \\\text { Factory supplies } & \underline{ 50,000} \\ \text { Total } & \underline{\$ 600,000} \\\end{array}$$ Parr uses direct labor hours as the cost driver to allocate overhead costs.Budgeted direct labor hours for each product are:
Product X,15,000 direct labor hours
Product Y,10,000 direct labor hours
Product Z,5,000 direct labor hours
Required:
1)Determine the amount of manufacturing overhead that should be allocated to each of the three products.
2)Assume that each unit of Product X requires $40 in direct materials and three direct labor hours at a rate of $15 per hour.Calculate the budgeted or expected cost of each unit of X.

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Definitions:

User Cost

The expense of utilizing a good or service, including opportunity costs and depreciation.

Slippery Slope

A logical fallacy that argues a relatively small first step leads to a chain of related events culminating in some significant effect, often used as a form of argument to caution against a course of action.

Extracting

The act of removing or obtaining a resource from a source, often used in the context of mining, harvesting, or obtaining information from data.

Barrel

A unit of measurement for oil and petroleum products, equivalent to 42 U.S. gallons.