Question

Standard Product Cost

Atlas Furniture Company manufactures designer home furniture. Atlas 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	$24.00 per hr.
	standard time per unit	4 hrs.
Direct materials (oak):	standard price	$12.00 per bd. ft.
	standard quantity	17 bd. ft.
Variable factory overhead:	standard rate	$2.40 per direct labor hr.
Fixed factory overhead:	standard rate	$1.20 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 Atlas Furniture Company’s 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 Materials (Oak) ($12.00 x 17 bd.ft)	$204.00
Direct Labor ($24.00 x 4 hours)	$96.00
Variable factory overhead ($2.40 x 4 hours)	$9.60
Fixed factory overhead ( $1.20 x 4 hours)	$4.80
Standard cost per dining room table	$314.40

Hence, Standard cost per dining room table is $314.40 per table

b)
A standard cost system provides Atlas Furniture Company’s 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.