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Question - The following manufacturing costs were incurred by the Miracle Mile Company in 2015:
Direct materials
$225,000
Direct labor
350,000
Manufacturing overhead
470,000
These costs were incurred to produce 50,000 units of product. Variable manufacturing overhead was 70% of the direct materials cost.
In 2016, the direct material and variable overhead costs per unit will increase by 12%, but the direct labor costs per unit are not expected to change. Fixed manufacturing costs are expected to increase by 8%.
Required:
a. Prepare a cost estimate for an activity level of 40,000 units of product in 2016.
b. Determine the total product costs per unit for 2015 and 2016.
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