Kimm Company has gathered the following information about its product. Direct ma
ID: 2462956 • Letter: K
Question
Kimm Company has gathered the following information about its product.
Direct materials. Each unit of product contains 4.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.40 pounds. Materials cost $3 per pound, but Kimm always takes the 1.59% cash discount all of its suppliers offer. Freight costs average $0.45 per pound.
Direct labor. Each unit requires 2.00 hours of labor. Setup, cleanup, and downtime average 0.16 hours per unit. The average hourly pay rate of Kimm’s employees is $13.10. Payroll taxes and fringe benefits are an additional $2.50 per hour.
Manufacturing overhead. Overhead is applied at a rate of $7.20 per direct labor hour.
Compute Kimm’s total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)
Explanation / Answer
Calculation of total standard cost per unit:
Direct Material Cost:
Pounds Per product
4.1
Add: spoilage per unit produced
0.4
Total Pounds Required
4.5
Cost Per Pound ($3 * (1-1.59%)
$2.9523
Purchase Cost of Pounds = 4.50 * 2.9523 =
$ 13.29
Add: Freight Cost (4.5* $0.45)
$ 2.03
Direct Material Cost Per Unit
$15.31
Direct Labor Cost:
Total hours required per unit = (2+0.16)
2.16
Average hourly pay rate
$ 13.10
Total Wages Payment = 2.16 * 13.10 =
$ 28.30
Add: Payroll taxes and fringe benefits= 2.16 * $2.50 =
5.4
Total Direct Labor Cost Per Unit
$33.70
Manufacturing overhead Costs
Total hours required per unit = (2+0.16)
2.16
Hourly rate
$ 7.20
Total Manufacturing overhead Costs Per unit (2.16 * 7.20)
$15.55
Total standard cost per unit
$64.56
Calculation of total standard cost per unit:
Direct Material Cost:
Pounds Per product
4.1
Add: spoilage per unit produced
0.4
Total Pounds Required
4.5
Cost Per Pound ($3 * (1-1.59%)
$2.9523
Purchase Cost of Pounds = 4.50 * 2.9523 =
$ 13.29
Add: Freight Cost (4.5* $0.45)
$ 2.03
Direct Material Cost Per Unit
$15.31
Direct Labor Cost:
Total hours required per unit = (2+0.16)
2.16
Average hourly pay rate
$ 13.10
Total Wages Payment = 2.16 * 13.10 =
$ 28.30
Add: Payroll taxes and fringe benefits= 2.16 * $2.50 =
5.4
Total Direct Labor Cost Per Unit
$33.70
Manufacturing overhead Costs
Total hours required per unit = (2+0.16)
2.16
Hourly rate
$ 7.20
Total Manufacturing overhead Costs Per unit (2.16 * 7.20)
$15.55
Total standard cost per unit
$64.56
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