Question

Below is the total Standard Cost for Producing one dozen chocolate chip cookies:

Student 1:

Particulars	Quantity	Rate	Total Standard Cost
Direct Materials
Flour	5Kg	$2.00	$10.00
Sugar	2Kg	$1.00	$2.00
Other Ingredients	1kg	$1.00	$1.00
Direct Labour	8 Hours	$1.50	$12.00
Total Standard Cost			$25.00

Student 2

Step 1

Direct Material Cost for 1 dozen cookies:

Ingredients Total Standard Cost

1 egg 0.30

1/4 cup milk 0.25

3 cups flour 1.00

1 cup chocolate chips 0.75

Other Ingredients 1.25

Total Direct Material Cost 3.55

Direct Labour Cost (1 hour) 0.5

Total Standard Cost= 0.5 + 3.55= $4.05

A) Each group should compare the estimates of its members. Where estimates differ, determine why there were differences. Did assumptions differ? Did some members have more knowledge about the product than others? Form a group estimate of the standard cost of the product.

Answer 1

Group estimate

	Student 1		Student 2
Particulars	quantity	cost	quantity	cost
flour	5kg	$10	3cup	$1
sugar	2kg	$2
other ingredients	1kg	$1		$1.25
egg			1	$0.30
milk			1/4cup	$0.25
chocolate chip			1cup	$.75
total direct material cost		$13		$3.55
Direct labour cost	8 hr @$1.5	$12	1hr @$0.5	$0.5
Total cost		$25		$4.05

The standard cost estimate of both the students is different. Differences are because of experience Student 1 has no experience of cooking cookies whereas Student 2 has experience of this and that's why he is more accurate. By experience Student 2 is much specific about items whereas Student 1 has made random estimate of quantity. Student 1 has overestimated and Student 2 has underestimated the cost. It seems Student 2 has more knowledge about the product as he is very specific about items to be used and their exact quantity to be used. whereas Student 1 has no idea about the quantity of items and even the item names and is overestimating quantity. Same is with the direct labor, student 2 has a clear idea of how much time it will take for 12 cookies but no idea of labor rate.