Question

Parsons Company is planning to produce 2,700 units of product in 2020. Each unit requires 3.60 pounds of materials at $7.20 per pound and a half-hour of labor at $16.00 per hour. The overhead rate is 60% of direct labor.

(a)

Compute the budgeted amounts for 2020 for direct materials to be used, direct labor, and applied overhead.

		enter a dollar amount
		enter a dollar amount
		enter a dollar amount

(b)

Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g. 2.75.)

enter the standard cost of one unit of product in dollars rounded to 2 decimal places

Answer 1

(a)

Budgeted production = 2,700

Direct materials per unit = 3.60 pound

Direct materials cost per pound = $7.20

Direct labor hour per unit = 0.50

Direct labor rate per hour = $16

Overhead rate = 60% of direct labor

	Budgeted production(a)	Standard cost per unit (b)	Budgeted amount (a x b)
Direct materials	2,700	$25.92	$69,984
Direct labor	2,700	$8	$21,600
Overhead	2,700	$4.80	$12,960

Direct materials to be used	$	69,984
Direct labor	$	21,600
Applied overhead	$	12,960

b.

Calculation of Standard Cost Per Unit
	Budgeted Quantity per unit	Rate per unit	Standard Cost
Direct materials	3.60	7.20	25.92
Direct labor	0.50	16	8
Overhead			4.80
Total			$38.72

Standard cost per unit = $38.72