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	$21.00 per hr.
	standard time per unit	3 hrs.
Direct materials (oak):	standard price	$12.00 per bd. ft.
	standard quantity	18 bd. ft.
Variable factory overhead:	standard rate	$2.80 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 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) Calculate standard cost per dining room table

Direct material (12*18)	216
Direct labor (21*3)	63
Variable factory overhead (2.8*3)	8.40
Fixed factory overhead (0.80*3)	2.40
Standard cost per dinning room table	289.80

b) A standard cost system provides Atlas Furniture Company’s management a cost control tool using the principle of Standard costing . Using this principle, Actual cost deviations from standards can be investigated and corrected.