Exercise 25-3 Kimm Company has gathered the information shown below about its pr

Question

Exercise 25-3

Kimm Company has gathered the information shown below about its product.

Direct materials. Each unit of product contains 3.80 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.70 pounds. Materials cost $1 per pound, but Kimm always takes the 2.19% cash discount all of its suppliers offer. Freight costs average $0.28 per pound.

Direct labor. Each unit requires 2.40 hours of labor. Setup, cleanup, and downtime average 0.25 hours per unit. The average hourly pay rate of Kimm’s employees is $11.40. Payroll taxes and fringe benefits are an additional $3.70 per hour.

Manufacturing overhead. Overhead is applied at a rate of $6.50 per direct labor hour.

Compute Kimm’s total standard cost per unit. (Round standard costs to 2 decimal places, e.g. 2.75.)

Explanation / Answer

Standard cost for material = (3.80 +0.70) *1*(1-0.0219) +(3.80 +0.70)*0.28 = 5.66

Standard cost for labor = (2.40 + 0.25) *11.40 + (2.40 +0.25)*3.70 =40.01

Standard cost of manufacturing overhead = (2.40 +0.25) *6.50 = 17.22

Kimm’s total standard cost per unit = (5.66 + 40.01 + 17.22) = 62.89 cost/unit

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