a) The total manufacturing cost is $ 3125
b) The cost per skateboard is $ 25
Solution:
The company incurred direct materials costs of $1,150 and direct labor costs of $250
Direct material cost = $ 1150
Direct labor cost = $ 250
Overhead is applied using a rate of 150% of direct materials costs
Therefore,
Overhead cost = 150 % of 1150
[tex]Overhead\ cost = 150 \% \times 1150\\\\Overhead\ cost = \frac{150}{100} \times 1150\\\\Overhead\ cost = 15 \times 115\\\\Overhead\ cost = 1725[/tex]
Total manufacturing cost = Direct material cost + Direct labor cost + overhead cost
Total manufacturing cost = 1150 + 250 + 1725 = 3125
Thus total manufacturing cost is $ 3125
b. What is the cost per skateboard?
Cost per skateboard = (Total manufacturing cost) ÷ (number of skateboards)
[tex]Cost\ per\ skateboard = \frac{3125}{125} = 25[/tex]
Thus cost per skateboard is $ 25
