I need help correcting this problem. I am not sure how to solve it. Kimm Company

Question

I need help correcting this problem. I am not sure how to solve it.

Kimm Company has gathered the following information about its product. Each unit of product contains 4.80 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.20 pounds. Materials cost $2 per pound, but Kimm always takes the 1.82% cash discount all of its suppliers offer. Freight costs average $0.31 per pound. Direct labor. Each unit requires 2.10 hours of labor. Setup, cleanup, and downtime average 0.15 hours per unit. The average hourly pay rate of Kimm's employees is $10.50. Payroll taxes and fringe benefits are an additional $3.50 per hour. Manufacturing overhead. Overhead is applied at a rate of $7.60 per direct labor hour. Compute Kimm's total standard cost per unit.

Explanation / Answer

Calculation of Total Standard Cost per Unit:

Cost of Material = 5 x 2 = $10 - 1.82 (1.82% discount) = $8.18 Per Unit

Add: Freight = 0.31 x 5 = $1.55

Total Cost of Material = $9.73

Direct Labor Cost: Total Hours required = 2.10 + 0.15 = 2.25 Hours

Rate = 10.50 + 3.50 = $14 per Hour

Total Labor Cost = 2.25 x 14 = $31.50 Per Unit

Manufacturing Overhead = 2,25 x 7.60 = $17.10

Total Standard Cost per Unit = 9.73 + 31.50 + 17.10 = $58.33

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