Exercise 22-1 Stanton Company is planning to produce 2,500 units of product in 2

Question

Exercise 22-1 Stanton Company is planning to produce 2,500 units of product in 2012. Each unit requires 1.40 pounds of materials at $5.40 per pound and a half-hour of labor at $13.00 per hour. The overhead rate is 60% of direct labor. (a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead. Direct materials $ Direct labor $ Overhead $ (b) Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g. 2.75.) Standard cost $ Brief Exercise 23-3 In Harley Company it costs $31 per unit ($18 variable and $13 fixed) to make a product that normally sells for $49. A foreign wholesaler offers to buy 3,560 units at $26 each. Harley will incur special shipping costs of $1 per unit. Assuming that Harley has excess operating capacity. Indicate the net income (loss) Harley would realize by accepting the special order. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.) Reject Order Accept Order Net Income Increase (Decrease) Revenues $ $ $ Costs—Manufacturing Shipping Net income/(loss) $ $ $ The special order should be .

Explanation / Answer

(a)

Budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead are calculated as under:

(b)

Standard cost of one unit of product is calculated as under:

Particulars Per unit 2,500 units Direct Material 1.4*5.4 18900 Direct Labour .5*13 16250 Applied overhead 60% of DL 9750

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