In: Accounting

Standard Cost and Budgeted Cost

 Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 100,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor. 

Instructions : Compute the estimates for (a) standard cost and (b) budgeted cost.


Expert Solution

Standard Cost is the cost per unit, and budgeted is the total cost. Since the question already mentioned the total amount of the cost, we only need to divide it by the total unit to find the Standard Cost, and use the cost that mentioned before for the Budgeted Cost.

A Standard Cost (Unit Amount)
  Direct Material  
  600000/100000= 6
  Direct Labor  
  800000/100000 =  8
B Budgeted Cost (Total Amount)
  Direct Material = 600000
  Direct Labor = 800000

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