Kimm Company has gathered the following information about its product. Direct ma

Question

Kimm 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 0.20 pounds. Materials cost $3 per pound, but Kimm always takes the 3.65% cash discount all of its suppliers offer. Freight costs average $0.27 per pound.

Direct labor. Each unit requires 1.30 hours of labor. Setup, cleanup, and downtime average 0.18 hours per unit. The average hourly pay rate of Kimm%u2019s employees is $13.30. Payroll taxes and fringe benefits are an additional $2.70 per hour.

Manufacturing overhead. Overhead is applied at a rate of $6.00 per direct labor hour.

Compute Kimm%u2019s total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)

Explanation / Answer

Hi,

Please find the answer as follows:

Direct Material Cost = (4.4 + .20)*(.100-.0365)*3 + (4.4+.20)*.27 = 14.5383

Direct Labor Cost = (1.3 + .18)*13.30 + (1.3+.18)*2.70 = 23.68

Overhead = (1.3 + .18)*6 = 8.88

Total standard cost per unit = 14.5383 + 23.68 + 8.88 = 47.0983 or 47.10

Thanks

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