Kimm Company has gathered the following information about its product. Direct ma

Question

Kimm Company has gathered the following information about its product.

Direct materials. Each unit of product contains 3.20 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.80 pounds. Materials cost $4 per pound, but Kimm always takes the 4.52% cash discount all of its suppliers offer. Freight costs average $0.38 per pound.

Direct labor. Each unit requires 2.50 hours of labor. Setup, cleanup, and downtime average 0.14 hours per unit. The average hourly pay rate of Kimm’s employees is $10.50. Payroll taxes and fringe benefits are an additional $2.10 per hour.

Manufacturing overhead. Overhead is applied at a rate of $5.20 per direct labor hour.

Compute Kimm’s total standard cost per unit ______

Explanation / Answer

Computation of total standard cost per unit:

Direct Material
Material required for one unit 3.20 pounds
Add: Average waste per unit 0.80 pounds
Total material reuired per unit   4.00 pounds

Material cost per pound $4.00
Less : Cash discount ($0.18)
($4 x 4.52%)
Add: Freight cost $0.38
Total cost per pound $4.20

Direct Labor
Hours required for one unit 2.50 hours
Add: Average downtime 0.14 hours
Total hours reuired per unit 2.64 hours

Labor cost per hour $10.50
Add: Taxes $2.10
Total cost per hour $12.60

Total Standard cost per unit
Direct Material (4.00 pounds x $4.20 per pound) $16.80
Direct Labor (2.64 hours x $12.60 per hour) $33.26
Manufacturing Overhead (2.64 hours x $5.20 per hour) $13.73
Total Standard cost per unit $63.79

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