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 3.00 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.10 pounds. Materials cost $3 per pound, but Kimm always takes the 4.69% cash discount all of its suppliers offer. Freight costs average $0.33 per pound.

Direct labor. Each unit requires 1.20 hours of labor. Setup, cleanup, and downtime average 0.25 hours per unit. The average hourly pay rate of Kimm’s employees is $13.60. Payroll taxes and fringe benefits are an additional $3.70 per hour.

Manufacturing overhead. Overhead is applied at a rate of $7.60 per direct labor hour.

I am lost with the percentage in the direct materials problem

Explanation / Answer

Answer: Total Material Cost as required in the question:

Material Cost: Material per unit (in Pounds) 3 Pounds Add: Cushion for Waste and spoilage 0.1 Pounds A Total material required per unit 3.1 Pounds Material Cost per pound in $ 3 Less: Discount applicable 0.1407 ($3*4.69%) B Material Cost per pound for Kimm 2.8593 Material cost per unit (A*B) 8.86 in$ Add: Freight cost per unit ($0.33*3.1 pounds) 1.023 in$ Total material cost per unit 9.89 in$

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