Morris Company Makes One Product, and It Expects to Incur

question 17

Essay

Morris Company makes one product, and it expects to incur a total of $600,000 in indirect (overhead) costs during the current year. Production of the product for the year is expected to be:
Required:
$$\begin{array} { | l | l | l | r | r | } \hline & { \text { Quarter } } \\\hline & 1 & 2 & 3 & 4 \\\hline \begin{array} { l } \text { Estimated } \\\text { production in } \\\text { units }\end{array} & 40,000 & 15,000 & 27,000 & 38,000 \\\hline\end{array}$$ 1) Calculate a predetermined overhead rate based on the number of units of product expected to be made during the current year.2) Assuming that direct materials and direct labor costs are $10 and $15, respectively, determine the total cost per unit using the overhead rate you calculated in part (1).

---

Definitions:

Total Revenue

The total amount of money received by a firm from selling its goods or services.

Total Cost

The complete amount of money required for the production of a given level of output, including both fixed and variable costs.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the profits that exceed normal expected profits.

Marginal Revenue

The surplus earnings generated by the sale of one extra unit of a product or service.