Dentech, Inc., uses 13 units of part RM67 each month in the
production of dentistry equipment. The cost of manufacturing one
unit of RM67 is the following:
Direct material
$
5,000
Material handling
(20% of direct-material cost)
1,000
Direct labor
35,000
Manufacturing
overhead (150% of direct labor)
52,500
Total manufacturing cost
$
93,500
Material handling represents the
direct variable costs of the Receiving Department that are applied
to direct materials and purchased components on the basis of their
cost. This is a separate charge in addition to manufacturing
overhead. Dentech