Kimm Company has gathered the information shown below about its product. Direct

Question

Kimm Company has gathered the information shown below about its product.

Direct materials. Each unit of product contains 3.50 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.50 pounds. Materials cost $2 per pound, but Kimm always takes the 4.39% cash discount all of its suppliers offer. Freight costs average $0.26 per pound.

Direct labor. Each unit requires 2.90 hours of labor. Setup, cleanup, and downtime average 0.17 hours per unit. The average hourly pay rate of Kimm’s employees is $10.80. Payroll taxes and fringe benefits are an additional $2.50 per hour.

Manufacturing overhead. Overhead is applied at a rate of $6.80 per direct labor hour.

Compute Kimm’s total standard cost per unit. (Round standard costs to 2 decimal places, e.g. 2.75.)

Explanation / Answer

Particulars Pounds Cost Per Pound Cost Per Unit Material Cost         3.50 Add: Wastage         0.50         4.00         2.00         8.00 Less: Discount Received 4.39%        (0.35) Add: Freight Cost         0.26         1.04 Net Material Cost         8.69 Direct Labour Hrs         2.90 Add: Setup Clean Time 0.17 Total Hrs a)         3.07 Rate per Hr b) 10.8 Direct Labor Cost a)* b)       33.16 Add: Additional Benefits a) * 2.5         2.50         7.68 Total Labour Cost       40.83 Manufacturing Overheads a) * 6.80 6.8       20.88 Total Standard Cost       70.40

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