Question

Exercise 25-3

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Stefani Company has gathered the following information about its product.

Direct materials: Each unit of product contains 4.40 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.70 pounds. Materials cost $ 2 per pound, but Stefani always takes the 3.00 % cash discount all of its suppliers offer. Freight costs average $ 0.35 per pound.

Direct labor. Each unit requires 1.30 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani’s employees is $ 13.20 . Payroll taxes and fringe benefits are an additional $ 3.00 per hour.

Manufacturing overhead. Overhead is applied at a rate of $ 7.00 per direct labor hour.

Compute Stefani’s total standard cost per unit. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.)

Total standard cost per unit

$

Answer 1

Direct material cost:

Quantity required per unit = 4.4 pounds + 0.7 pounds = 5.1 pounds

Rate per unit = 2*0.97 = 1.94

Hence, Direct material cost per unit = 5.1*1.94 = 9.89

Direct labour cost:

Labour hour's required per unit = 1.30+0.20 = 1.5 hours

Rate per hour = 13.20+3 = 16.20

Total labour cost per unit = 1.5*16.20 = 24.3

Manufacturing overhead:

Manufacturing overhead rate = 7 per direct labour hour

No. of direct labour hours per unit = 1.5 hours

Hence, Manufacturing overhead per unit = 1.5*7 = 10.5

Total standard cost per unit = 9.89+24.3+10.5 = $44.69

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