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Ronald pneumatics Inc uses a manufacturing costing system with one direct cost category and three indirect categories:
1)Setup,Production Order,material handling costs that vary with the number of batches.
2)Manufacturing Operation Costs that vary with machine hours.
3)Cost of Engineering That Varies with number of engineering changes made.
In response to competitive pressures at the end of 20X8 Ronald Inc employed techniques to reduce manufacturing costs.Below is actual information for 20X8:Setup,Production order,material handling costs per batch : $4000
Total manufacturing operating costs per machine hours: $27.50
Cost per Engineering Change: $6000Actual Results:
Units of RP4 produced 1750 units
Direct material cost/unit $600
Total number of batches 35 batches
required to produce RP4
Total Machine hours required 10500
to produce RP4
Number of Engineering 7
Changes MadeCalculate the manufacturing cost/unit of RP4 in 20X8.
You do not say which part of the question is giving you the problem.
You can calculate the total overheads for RP4 (for example, we know they have 7 engineering changes and that each engineering change costs $6000, so we know that the total for engineering changes is $42,000. You can do the same for Manufacturing operating costs and for Setup etc costs. Adding them together gives the total overheads.)
You know how many units are produced (1750) and so you can get the overhead cost per unit by dividing total overheads by 1750.
All you need to do then is add this to the material cost per unit and you have the manufacturing cost per unit.
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