Question
In: Accounting
Simple Styles is a dress manufacturer. The company purchases fabric with a list price of $200...
Simple Styles is a dress manufacturer. The company purchases fabric with a list price of $200 per bolt and pays shipping charges of $3 per bolt. Each bolt contains 100 yards of fabric. Simply Styles receives a volume discount of 15% per bolt. Each dress uses a standard quantity of 2 yards of fabric.
Please:
Calculate the standard cost of material for one dress.
Solutions
Expert Solution
|
Standard Material cost per dress |
||
|
A |
Cost per Bolt |
$ 200.00 |
|
B=A x 15% |
Less: Discount |
$ 30.00 |
|
C=A-B |
Subtotal |
$ 170.00 |
|
D |
Add: Shipping cost per bolt |
$ 3.00 |
|
E=D+C |
Total cost per bolt |
$ 173.00 |
|
F |
Number of Yards of fabric per bolt |
100 |
|
G=E/F |
Cost per yard of fabric |
$ 1.73 |
|
H |
Yards of fabric needed per dress |
2 |
|
I=G x H |
Material cost per dress |
$ 3.46 |
Standard Material cost per dress =$3.46
Discount is not given on shipping cost that is why discount is only calculated on cost of Bolt only.
Standard cost of material per yard is calculated assuming that Volume discount is availed. Alternative answer is also given below assuming discount is not availed.
Please ignore Alternate answer depending upon assumption.
|
Material cost per dress |
||
|
A |
Cost per Bolt |
$ 200.00 |
|
B=A x 15% |
Less: Discount |
$ - |
|
C=A-B |
Subtotal |
$ 200.00 |
|
D |
Add: Shipping cost per bolt |
$ 3.00 |
|
E=D+C |
Total cost per bolt |
$ 203.00 |
|
F |
Number of Yards per bolt |
100 |
|
G=E/F |
Cost per yard |
$ 2.03 |
|
H |
Yards needed per dress |
2 |
|
I=G x H |
Material cost per dress |
$ 4.06 |
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