A tennis racquet manufacturer makes several types of racquets. At the start of the year, the manufacturer estimates overhead to equal $4 million. The overhead is applied to tennis racquets based on direct labor dollars, which are estimated to be $2 million in the coming year. Direct material costs are estimated to be $3 million.
Required:
2-A. What is the overhead application rate of the manufacturer?
2-B. What is the product cost of a batch of 1,000 racquets that use 200 direct labor hours at $10 perhour and $5,000 of direct materials.
2-C. What is the product cost per unit (i.e. to make one racquet)?