Brief Exercise 23-1 Materials Labor Open Show Work Brief Exercise 23-1 Lopez Com

ID: 2582526 • Letter: B

Question

Brief Exercise 23-1

Materials

Labor

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Brief Exercise 23-1

Lopez Company uses both standards and budgets. For the year, estimated production of Product X is 500,000 units. Total estimated cost for materials and labor are $1,000,000 and $1,300,000.

Compute the estimates for (a) a standard cost and (b) a budgeted cost. (Round standard costs to 2 decimal places, e.g. 1.25.)

Materials

Labor

(a) Standard cost $

(b) Budgeted cost $

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Explanation / Answer

Solution:

Material

Labor

Standard cost

2.00

2.60

Budgeted cost

1,000,000

1,300,000

Working:

(a) Standards are stated as a per unit amount. Thus, the standards are materials $2.00, ($1,000,000 ÷ 500,000 ), and labor $2.60, ($1,300,000 ÷ 500,000).

(b) Budgets are stated as a total amount. Thus, the budgeted costs for the year are materials $1000,000 and labor $1300,000