Standard Product Cost Hickory Furniture Company manufactures unfinished oak furn
ID: 2560977 • Letter: S
Question
Standard Product Cost
Hickory Furniture Company manufactures unfinished oak furniture. Hickory uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining room table are as follows:
a. Determine the standard cost per dining room table. If required, round your answer to two decimal places.
$ per table
b. A standard cost system provides Hickory Furniture management a cost control tool using the principle of Selectcost controlmanagement by exceptionItem 2 . Using this principle, SelectmajorminorItem 3 cost deviations from standards can be investigated and corrected.
Direct labor: standard rate $20.00 per hr. standard time per unit 3.0 hrs. Direct materials (oak): standard price $9.50 per bd. ft. standard quantity 15 bd. ft. Variable factory overhead: standard rate $2.40 per direct labor hr. Fixed factory overhead: standard rate $1.20 per direct labor hr.Explanation / Answer
(a).
Type of cost
Price or Rate
Quantity or Hours
Standard Cost
Direct material
$9.50
15 bd ft.
$142.50
Direct labor
$20
3 hrs.
$60
Variable factory overhead
$2.40
3 hrs
$7.20
Fixed factory overhead
$1.20
3 hrs.
$3.60
Total Standard Cost per Table
$213.30
(b).
A standard cost system provides Hickory Furniture management a cost control tool using the principle of Selectcost control management by exception item.
It is true because controlling can be made on the basis of exceptional items. If a company or firm is controlling all items then it will be much costly and much confusing. So a company or firm need to control its costs on the basis of exceptional items so that a perfect control system can be maintained.
Major and Minor items are as follow;
In given question following items can be major and minor;
Direct material and Direct labor are major items.
Variable factory overhead and Fixed factory overhead are minor items in this given question.
Cost deviations from standards can be investigated and corrected;
On the basis of standard cost sytem, actual costs are measured and compared with standard costs to find out deviations. After finding out deviations (if any) corrective actions are taken to make required changes in the process of manufacturing.
Thus it is true that standard costing helps in doing this.
Type of cost
Price or Rate
Quantity or Hours
Standard Cost
Direct material
$9.50
15 bd ft.
$142.50
Direct labor
$20
3 hrs.
$60
Variable factory overhead
$2.40
3 hrs
$7.20
Fixed factory overhead
$1.20
3 hrs.
$3.60
Total Standard Cost per Table
$213.30
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