Question

Standard Product Cost

Sana Rosa Furniture Company manufactures designer home furniture. Sana Rosa uses a standard cost system. The direct labor, direct materials, and factory overhead standards for an unfinished dining room table are as follows:

Direct labor:	standard rate	$23.00 per hr.
	standard time per unit	2.00 hrs.
Direct materials (oak):	standard price	$10.00 per bd. ft.
	standard quantity	15 bd. ft.
Variable factory overhead:	standard rate	$2.40 per direct labor hr.
Fixed factory overhead:	standard rate	$0.80 per direct labor hr.

a. Determine the standard cost per dining room table. If required, round your answer to two decimal places.
$ per dining room table

b. A standard cost system provides Rosa Furniture management a cost control tool using the principle of  . Using this principle,   cost deviations from standards can be investigated and corrected.

Answer 1

a. Computation of Standard Cost per Dinning Room table:

Direct Labour ($23*2)	$46.00
Direct Materials ($10*15)	$150.00
Variable factory overhead ($2.40*2)	$4.80
Fixed factory overhead ($0.80*2)	$1.60
Standard cost per dining room table	$202.40

b. A standard cost system provides Sana Rosa management a cost control tool using the principle of "management by exception". Using this principle, "major" cost deviations from standards can be investigated and corrected.