Reference no: EM132564090

Question - Company Beta produces and sell yo-yos, and the company has received an order of 10,000 units of its product during the current year of 2020. For allocating the manufacturing overhead (i.e., indirect cost pool) Company Beta uses the direct machine-hours (i.e., cost-allocation base).

The production of each batch of 1,000 yo-yos takes 10 labour-hours at a rate of $20 per labour hour and 25 machine-hours. Each batch of 1,000 yo-yos consumes $200 in direct material. The budgeted indirect manufacturing costs for Company Beta for the current year of 2020 is $1,000,000 and the production budget is of 20,000,000 yo-yos.

Required -

a. Calculate the indirect manufacturing costs, and the total manufacturing costs of this order of 10,000 units of yo-yos.

b. Considering the industry benchmark for indirect manufacturing costs for similar orders is 50% of direct manufacturing labour, identify whether the order of 10,000 units has an indirect manufacturing costs lower or higher than a similar order using the industry benchmark. Briefly explain what could cause a difference between this order and the industry benchmark for the indirect manufacturing costs.