A cost analyst for Stamper Manufacturing Co. has assembled the following data ab

Question

A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad:

The piece of sheet metal from which ? ve pad cases can be made costs $.24.
This amount is based on the number of sheets in a 4,200-pound bundle of sheet
metal, which is the usual purchase quantity.
The foam pad that is put in the case costs $.06, based on the number of pads that
can be cut from a large roll of foam.

Production standards, based on engineering analysis recognizing attainable
performance, provide for the manufacture of 1,000 pads by two workers in an
eight-hour shift. The standard direct labor pay rate is $15 per hour.

Manufacturing overhead is applied to units produced using a predetermined
overhead application rate of $16 per direct labor hour, of which $6 per hour is
?xed manufacturing overhead.

Required:
a. Calculate the standard absorption cost of a package of 10 stamp pads.
b. Stamper Manufacturing Co.

Explanation / Answer

a. Standard cost per unit : Dir Mat :Cost of Sheet metal $0.24 Cost of pad $0.06 Dir Labour: 2W*8Hr*$15/1000 = $0.24 Mfg overheads $16 per Hr*2W*8hr/1000 = $0.256 ------------------------------------------------------------- Std cost per Stamp pad is $0.796 So For 10 Stamp pad, Std cost = 10*$0.796 = $7.96 .................Ans (a) b. Here relevant costs will be variable costs as Fied cost are period costs. So Std Cost per stamp pad is: Dir Mat :Cost of Sheet metal $0.24 Cost of pad $0.06 Dir Labour: 2W*8Hr*$15/1000 = $0.24 Mfg overheads $10 per Hr*2W*8hr/1000 = $0.16 ------------------------------------------------------------- Std cost per Stamp pad is $0.70 Each Package has 10 pads. SO Cost of each package = 10*$0.70 = $7.00 per pacage>>An(B)

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