Softy, Inc. manufactures teddy bears and dolls. Currently, Softy makes 2,000 teddy bears each month. Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor. Softy uses two activities in manufacturing the teddy bears: Sewing and Processing. The total cost associated with Sewing (for both bears and dolls) is $15,000 a month, allocated on the basis of direct labor hours. The total cost associated with Processing is $10,000 a month, allocated on the basis of batches.

What is the total manufacturing cost for one teddy bear?

A. $2.50

B. $4.50

C. $7.00

D. $8.00

Question

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aquialaska aquialaska · Answer 1 · 2020-04-05T06:58:29+02:00

Answer:

$8.00

Explanation:

The computation of total manufacturing cost for one teddy bear is shown below:-

50% of sewing cost $15,000 = $7,500

35% of processing cost $10,000 = $3,500

Total cost assigned to teddy bear = $7,500 + $3,500

= $11,000

Direct material = $2

Direct labor = $0.50

Overhead per unit = Total cost assigned to teddy bear ÷ Each months teddy bears manufactured

= $11,000 ÷ 2,000

= $5.50

Total cost per unit = Direct Material + Direct Labor + Overhead per unit

= $2 + $0.50 + $5.50

= $8.00