Stefani Company has gathered the following information about its product. Direct

Question

Stefani Company has gathered the following information about its product.

Direct materials: Each unit of product contains 3.40 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.60 pounds. Materials cost $ 5 per pound, but Stefani always takes the 4.00 % cash discount all of its suppliers offer. Freight costs average $ 0.40 per pound.

Direct labor. Each unit requires 1.00 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani’s employees is $ 10.00 . Payroll taxes and fringe benefits are an additional $ 3.90 per hour.

Manufacturing overhead. Overhead is applied at a rate of $ 4.50 per direct labor hour.

Compute Stefani’s total standard cost per unit. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.)

Explanation / Answer

Direct material cost: Material used per unit * per unit cost

                                = (3.40 +.60 ) *[ (5*.96) + .40]

                                = 4 * [4.8+.40]

                                = 4* 5.2

                               =$ 20.80 per unit

Direct labor cost = Hours used to produce unit * Per hour cost

                             = (1 +.20 ) * (10+3.90)

                             = 1.20 * 13.9

                             = $ 16.68 per unit

Manufacturing overhead = 4.50 * (1+ .20)

                                             = 4.50 * 1.20

                                              = $ 5.40 per unit

Total standard cost per unit = 20.8+16.68+5.4

                                               = $ 42.88 per unit

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