Stefani Company has gathered the following information about its product. Direct
ID: 2468055 • Letter: S
Question
Stefani Company has gathered the following information about its product. Direct materials: Each unit of product contains 4.20 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.70 pounds. Materials cost $1 per pound, but Stefani always takes the 2.00% cash discount all of its suppliers offer. Freight costs average $0.45 per pound. Direct labor. Each unit requires 1.60 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani’s employees is $12.30. Payroll taxes and fringe benefits are an additional $2.40 per hour. Manufacturing overhead. Overhead is applied at a rate of $6.60 per direct labor hour. Compute Stefani’s total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)
Explanation / Answer
Material
SQ = Standard Quantity for one unit of production = 4.2
Spoilage Cost = 0.70
4.90
Selling price = $ 1
Standard Material cost per unit 4.90 x 1 = $ 4.90
(-) discount @ 2 % = 0.098
+ Fright = 0.450
$ 5.252
Labor
No of labor hour required per unit of production =1.60
(+) down time = 0.20
$ 1.80
Per hour labor cost
= (12.30 + 2.40)
=$ 14.7
Standard labor cost per unit
= 1.8 x 14.7 = $ 26.46
Overhead = 6.6 x 1.8 = $ 11.88
Standard cost per unit = (Material + Labor + Overhead)
= 5.252 + 26.46 + 11.88
= $ 43.592 or $ 43.60
Stefani’s total standard cost per unit is $ 43.60 .
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