Kimm Company has gathered the following information about its product. Direct ma
ID: 2465400 • Letter: K
Question
Kimm Company has gathered the following information about its product.
Direct materials. Each unit of product contains 3.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.50 pounds. Materials cost $4 per pound, but Kimm always takes the 1.07% cash discount all of its suppliers offer. Freight costs average $0.35 per pound.
Direct labor. Each unit requires 1.20 hours of labor. Setup, cleanup, and downtime average 0.11 hours per unit. The average hourly pay rate of Kimm’s employees is $13.80. Payroll taxes and fringe benefits are an additional $2.80 per hour.
Manufacturing overhead. Overhead is applied at a rate of $5.10 per direct labor hour.
Compute Kimm’s total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)
Total standard cost per unit $
Explanation / Answer
WN-1)
MATERIAL COST $ 4.00
FREIGHT COST $ 0.35
TOTAL $ 4,35
LESS; DISCOUNT ( $ 4.00 X 1.07%) = 0.04
STANDARD MATERIAL COST PER POUND = $ 4.31
MATERIAL REQUIRED = 3.10 + 0.5 = 3.60 POUND
WN-2) DIRECT LABOUR HOURS = 1.20 + 0.11 = 1.31 HOURS
WN-3) DIRECT LABOUR RATE PER HOUR = $ 13,80 + $ 2.80 = $ 16.60
THEREFORE STANDARD COST PER UNIT =
DIRECT MATERIAL ( $ 4.31 X 3.6) = $ 15.52
DIRECT LABOUR ( $ 16.6 x 1.31) = $ 21.75
MANUFACTURING OVERHEAD = $ 6.68
( $ 5.10 X 1.31)
STANDARD COST PER UNIT = $ ( 15.52 + 21.75 + 6.68) = $ 43.95
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