Kula Company Ltd manufactures two products, Flora and Fauna. Estimates for the company's products for...
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Accounting
Kula Company Ltd manufactures two products, Flora and Fauna. Estimates for the company's products for next year are provided below:
Flora
Fauna
Estimated production volume
3 000
4 000
Direct material cost
$60 / unit
$90 / unit
Direct labour per unit
3 hours @ $25 / hour
4 hours @ $25 / hour
Kula's estimated overhead of $1 500 000 can be identified with three major activities: order processing ($280 000), machine processing ($1 020 000) and product inspection ($200 000). These activities are driven by the number of orders processed, machine hours, and inspection hours, respectively.
Estimated activity levels for the next year are as follows:
Flora
Fauna
Total
Orders processed
500
300
800
Machine hours
39 000
46 000
85 000
Inspection hours
7 000
18 000
25 000
Required:
Assuming that Kula Company Ltd uses activity-based costing to apply overhead to production, calculate the unit manufacturing costs of the Flora and Fauna products if the estimated manufacturing volume is attained.
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