Question

Stefani Company has gathered the following information about its product. Direct materials: Each unit of product contains 3.90 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.20 pounds. Materials cost $ 2 per pound, but Stefani always takes the 1.00 % cash discount all of its suppliers offer. Freight costs average $ 0.45 per pound. Direct labor. Each unit requires 2.60 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani’s employees is $ 13.40 . Payroll taxes and fringe benefits are an additional $ 3.10 per hour. Manufacturing overhead. Overhead is applied at a rate of $ 6.10 per direct labor hour.

Compute Stefani’s total standard cost per unit. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.)

Total Standard Cost per unit $

Answer 1

Direct material cost: Material used per unit * per unit cost

                                = (3.90 +.20 ) *[ (2*.99) + .45]

                                = 4.1 * (1.98+.45)

                                = 9.96 per unit

Direct labor cost = Hours used to produce unit * Per hour cost

                             = (2.60+0.20) * (13.40+3.10)

                             = 2.8 * 16.50

                             = $46.20 per unit

Manufacturing overhead = Applied rate * hours

                                      = 6.10 * (2.6+.20)

                                       =6.10 * 2.8

                                      = 17.08

Total standard cost per unit = Material cost per unit +labor cost per unit + overhead cost per unit

= 9.96 + 46.20 + 17.08

= $ 73.24