Norred Corporation has provided the following information Co

Norred Corporation has provided the following information: Cost per Unit Cost per Period $7.05 $3.70 $1.60 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Sales commissions Variable administrative expense Fixed selling and administrative expense $121,500 $1.50 $0.45 44,550 If 8,000 units are produced, the total amount of indirect manufacturing cost incurred is closest to:

Solution

Ans. Option 3rd $134300 *Calculations: Variable manufacturing overhead (1.60*8000) 12800 Fixed manufacturing overhead 121500 Total Manufacturing overhead 134300 All indirect expenses are considered as overhead, so total indirect manufacturing cost is $134500. [Note:   Direct materials and direct labor are not indirect cost. Sales commission, variable administrative expenses   and fixed selling and administrative expenses are not manufacturing cost so the Total indirect manufacturing cost includes only variable manufacturing overhead and fixed manufacturing overhead.]