Technical Measurement Company Manufactures Precision-Measuring Devices Used by Industrial Companies

Essay

Technical Measurement Company manufactures precision-measuring devices used by industrial companies in various capacities. The devices are produced in two stages: Assembly and Testing. The company has no beginning inventories because all units produced last year were sold by the end of the year. At the beginning of the year, the company has an order of 8,000 units. The company's predetermined overhead rate is based on materials used in assembly and direct labor hours in testing. Information concerning the predetermined overhead rates appears below: Direct labor is paid $20 per hour.
$$\begin{array} { l r r } & \text { Assembly } & \text { Testing } \\ \text { Budgeted overhead } & \$ 1,000,000 & 500,000 \\\text { Budgeted materials use }& 2,000,000 & 50,000 \\ \text { Budgeted direct labor hours } & 200,000 & 100,000 \\\text { Budgeted direct labor cost }& 3,000,000 & 1,500,000\end{array}$$

$$\begin{array}{l}\text { Other information regarding the production process: }\\\begin{array} { l r r } & \text { Assembly } & \text { Testing } \\\text { Materials requisitioned } & \$ 2,200,000 & \$ 48,000 \\\text { Direct labor cost } & 3,100,000 & 1,575,000 \\\text { Actual overhead cost } & 1,200,000 & 475,000\end{array}\end{array}$$
Required:
(a) Compute the predetermined overhead rate for each department.
(b) Calculate the total and per unit cost of producing 8,000 units.