Stefani Company has gathered the following information about its product. Direct

Question

Stefani Company has gathered the following information about its product. Direct materials: Each unit of product contains 4.20 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.70 pounds. Materials cost $1 per pound, but Stefani always takes the 2.00% cash discount all of its suppliers offer. Freight costs average $0.45 per pound. Direct labor. Each unit requires 1.60 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani's employees is $12.30. Payroll taxes and fringe benefits are an additional $2.40 per hour. Manufacturing overhead. Overhead is applied at a rate of $6.60 per direct labor hour. Compute Stefani's total standard cost per unit. Total standard cost per unit $

Explanation / Answer

Solution.

Calculation of Standard Cost per unit:

Working Notes

1. Cost of material required per unit:

Material contained in finished unit i.e., 4.20 pounds + Average waste 0.70 pounds = 4.90 pounds

Cost of Material = $1 - 2% = $0.98 per pound

Frieght Cost = $0.45 per pound

Total Cost of material in each unit = 4.90 pounds * ($0.98+$0.45) per pound = $7.01

2. Cost of Labor required per unit:

Total Labor hours required per unit = 1.60+0.20 = 1.80 hours

Cost of Labor per hour = $12.30 + $2.40 = $14.70

Total Cost of Labor per unit = 1.80 hours * $14.70 = $26.46

3. Cost of Manufacturing Overhead per unit:

Rate = $6.60 per labor hour

Total Oveheads = 1.80 hours * $6.60 = $11.88

Material per unit (1) $7.01 Labor per unit (2) $26.46 Manufacturing Overhead per unit (3) $11.88 Total Standard Cost per unit $45.35

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