Kimm Company has gathered the following information about its product. Direct ma
ID: 2481680 • Letter: K
Question
Kimm Company has gathered the following information about its product. Direct materials: Each unit of product contains 3.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.40 pounds. Materials cost $2 per pound, but Kimm always takes the 4.02% cash discount all of its suppliers offer. Freight costs average $0.42 per pound. Direct labor. Each unit requires 1.50 hours of labor. Setup, cleanup, and downtime average 0.14 hours per unit. The average hourly pay rate of Kimm’s employees is $11.80. Payroll taxes and fringe benefits are an additional $2.80 per hour. Manufacturing overhead. Overhead is applied at a rate of $5.90 per direct labor hour. Compute Kimm’s total standard cost per unit.
Explanation / Answer
Kimm Company Standard Cost Calculation Details Amt Diret Materials Qty per unit lbs lb per unit 3.10 Add: Average wastage+spoilage per unit 0.40 Total lbs per unit 3.50 Material cost per lb Material cost per lb 2.00 Less Cash Discount @4.02% 0.080 Net Cost Per lb 1.92 Add Freight Cost per lb= 0.42 Total Material Cost per lb= 2.34 Direct Labor cost Direct Labor Hours per unit 1.50 Add: set up, clean up and downtime per unit= 0.14 Total Direct labor hrs per unit 1.64 Direct Labor cost per hour Average hourly pay rate 11.80 Payroll tax +Fringe benefits per hour 2.80 Total Labor rate per hour= 14.60 Standard cost per unit Details QTY/Hr per unit Rate/lb or Hr Std cost Direct Materials 3.50 2.34 8.19 Direct Labor 1.64 14.60 23.94 Manufacturing Overhead 1.64 5.90 9.68 Std cost Per unit $ 41.81 So Kimm's Standard cost per unit =$41.81
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