Oxnard Industries produces a product that requires 2.6 pounds of materials per u

Question

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is .3 pounds and .1 pounds, respectively. The purchase price is $3 per pound, but a 2% discount is usually taken. Freight costs are $.15 per pound, and receiving and handling costs are $.10 per pound. The hourly wage rate is $10.00 per hour, but a raise which will average $.25 will go into effect soon. Payroll taxes are $1.00 per hour, and fringe benefits average $2.00 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is .2 hours and .1 hours, respectively.

The standard direct materials price per pound is

a.   $2.94.

b.   $3.00.

c.   $3.19

d.   $3.25

Explanation / Answer

Purchase price $      3.00 Less: discount = 3 x .02 $    -0.06 Add: Freight costs $      0.15 Add: handling costs $      0.10 Total Standard direct materials price per pound $      3.19

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