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:

Direct labor:	standard rate	$19 per hr.
	standard time per unit	2.5 hrs.
Direct materials (oak):	standard price	$9.5 per bd. ft.
	standard quantity	19 bd. ft.
Variable factory overhead:	standard rate	$2.8 per direct labor hr.
Fixed factory overhead:	standard rate	$1.2 per direct labor hr.

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 . Using this principle, cost deviations from standards can be investigated and corrected.

Answer 1

a)
Direct labor: $19 x 2.5 Hours	$47.50
Direct materials (oak): $9.5 x 19	$180.50
Variable factory overhead: $2.8 x 2.5 Hours	$7.00
Fixed factory overhead: $1.2 x 2.5 Hours	$3.00
Total Standard Cost per dinning room table	$238.00
b)
A standard cost system provides Hickory Furniture management a cost control tool using the principle of . Using this principle, cost deviations from standards can be investigated and corrected.The standard cost system also can be used to motivate employees to work efficiently with their time, use of materials, and other factory overhead resources.