Question

Lopez Company uses both standards and budgets. For the year, estimated production of Product X is 500,000 units. Total estimated cost for materials and labor are $1,400,000 and $1,700,000.

Compute the estimates for (a) a standard cost and (b) a budgeted cost. (Round standard costs to 2 decimal places, e.g. 1.25.)

Materials Labor
a) Standard cost $ $
b) Budgeted cost $ $

Answer 1

Standard cost is $2.8 for material and $3.4 for labour

Step-by-step explanation:

Standard cost is the cost of producing 1 unit and is recorded in a standard cost card. That means the amount of the 3 elements of cost (material, labor and overhead) used in making a single unit will be in a standard cost card. It is computed by dividing the total cost by the number of units to be produced.

a) STANDARD COSTS

Cost Type Computation Standard Costs

Material $1,400,000 /500,000 units $2.80

Labour $1,700,000 /500,000 units $3.40

Overhead Not provided -

Total Total cost for I unit of X $6.20

b) BUDGETED COSTS represents the total costs

Standard Costs Total Number of Units Budgeted Costs

$2.80 500,000 units $1,400,000

$3.40 500,000 units $1,700,000

TOTAL

$6.20 500,000 units $3,100,000