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 labor rate per hour is

a.   $ 10.00.

b.   $ 13.25.

c.   $13.00.

d.   $10.25.

Explanation / Answer

The answer is "a" i.e. $ 10.00

The standard direct labout rate per hour is $ 10.

And while calculating the standard rates, ignoring the raises in near future.

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