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

question 27

Essay

Parr Corporation makes three products, X, Y, and Z. Expected overhead costs for the coming year include: $$\begin{array} { | l | r | } \hline \text { Depreciation on factory building } & \$ 140,000 \\\hline \text { Factory utility costs } & 160,000 \\\hline \text { Supervisory salaries } & 250,000 \\\hline \text { Factory supplies } & 50,000 \\\hline \text { Total } & \$ 600,000 \\\hline\end{array}$$
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 3 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:

Antagonist

A substance that acts against and blocks an action, often referring to a drug that binds to a receptor in a cell and prevents a response in the presence of an agonist.

Synaptic Gap

The tiny space between neurons where neurotransmitters are released, allowing communication between cells.

Diffusion

The process by which molecules move from an area of higher concentration to an area of lower concentration until equilibrium is reached.

Synaptic Vesicles

Membrane-bound structures within presynaptic neurons that contain neurotransmitters, which are released into the synaptic gap in response to a neuron's action potential.