I have completed an homework assignment and wanted to get feedback on if I am correct and If I am not correct will someone please give me so help.

Manufacturing costs are computed monthly and prices for the next month are determined by adding 20% markup to each product's manufacturing costs. The support activity cost driver rate is based on machine hours. Actual machine hours for the months are: January- 1,350; Feb, June, July aug - 1,400; March, Sept - 1500; April, May - 1450; Oct, Nov, Dec - 1600

Practical compacity is 1,500 machine hours per month. Practical capacity is exceeded in some months by operating the machines overtime beyond regular shift hours. Mthly machine-related costs, all fixed, are $70,000 per month.

I must compute the mthly support cost driver rates used last year. Here is how I solved the problem:
I added the actual machine hours for the year - 17,650 total actual machine hrs. I multiplied 70,000 by 12 = 840,000. 840,000/17,650 x 1.2 (the markup)
and got $39.66 for the cost driver rate.

''Manufacturing costs are computed monthly and prices for the next month are determined by adding 20% markup to each product's manufacturing costs. ''

The way this sentence is written, u would have 12 answers because prices are increasing 20% next month. So each month would be times 1.2 of previous month

Chuck

So this how I would solve the problem:
Jan - 840,000/1,350 * 1.2 = 518.58 0r
Jan - 1350 * 1.2= 1620


if not, I am now confused

Quote:

---

Originally Posted by creahands

''Manufacturing costs are computed monthly and prices for the nex month are determined by adding 20% markup to each product's manufacturing costs. ''

The way this sentence is written, u would have 12 answers because prices are increasing 20% next month. So each month would be times 1.2 of previous month

Chuck

---

So this how I would solve the problem:
Jan - 840,000/1,350 * 1.2 = 518.58 0r
Jan - 1350 * 1.2= 1620


if not, I am now confused

Jan would be 70000 divided by 1350 times 1.2
This will give u cost of product for Feb.

Feb would be 70000 divided by 1400 times 1.2
This will give cost of product for March.

Chuck

Thanks a lot. That really helped. I was so confused. :)