Stefani Company has gathered the following information about its product. Direct
ID: 2451873 • Letter: S
Question
Stefani Company has gathered the following information about its product.
Direct materials: Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5 per pound, but Stefani always takes the 2% cash discount all of its suppliers offer. Freight costs average $0.25 per pound.
Direct labor. Each unit requires 2 hours of labor. Setup, cleanup, and downtime average 0.4 hours per unit. The average hourly pay rate of Stefani’s employees is $12. Payroll taxes and fringe benefits are an additional $3 per hour.
Manufacturing overhead. Overhead is applied at a rate of $7 per direct labor hour.
Compute Stefani’s total standard cost per unit
Explanation / Answer
Statement showing computation of Standard Cost per unit Particulars Amount Pounds per unit in Final Unit 4.50 Normal Wastage per unit 0.50 Total pound per unit 5.00 Material cost per pound 5.00 Cash discount@2% 0.10 Net Price for Materials 4.90 Freight cost per pound 0.25 Total cost per pound 5.15 Total Mat cost per unit = 5.15*5 25.75 No of hours per unit 2.00 Setup, Clean and downtime 0.40 Total hours per unit 2.40 Rate = 12+ 3 15.00 Labour cost per unit = 2.40*15 36.00 Manu o/H per unit = 2.4*7 16.80 Standard Cost per unit = DM+DL+Manu Cost = 25.75 + 36 + 16.80 78.55
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