Question

A company is setting its direct materials and direct labor standards for its leading product. Direct material costs from the supplier are​ $9 per square​ foot, net of purchase discount.​ Freight-in amounts to​ $0.20 per square foot. Basic wages of the assembly line personnel are​ $14 per hour. Payroll taxes are approximately​ 22% of wages. How much is the direct labor cost standard per​ hour? (Round your answer to the nearest​ cent.)

Answer 1

Labor cost standard per hour = $10.92

Step-by-step explanation:

Labor cost standard per hour = Basic wages of the assembly line personnel per hour = $14 - Payroll taxes = $14 - $3.08 = $10.92

As this cost will be computed in net effect, here taxes will be deducted but will be paid to government, so shall not be included in the direct amount paid to labor as this is not part of net payment to labor, as this portion of payment is paid to government.