Question

Stefani Company has gathered the following information about its product. Direct materials: Each unit of product contains 3.40 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.60 pounds. Materials cost $2 per pound, but Stefani always takes the 2.00% cash discount all of its suppliers offer. Freight costs average $0.25 per pound. Direct labor. Each unit requires 1.00 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani’s employees is $12.70. Payroll taxes and fringe benefits are an additional $2.00 per hour. Manufacturing overhead. Overhead is applied at a rate of $6.40 per direct labor hour. Compute Stefani’s total standard cost per unit

Answer 1

$31.88 per unit

Step-by-step explanation:

Direct material cost:

= Material used per unit × per unit cost

= 4 × 2.21

= 8.84

Material used :

= 3.40 per unit + 0.60 normal waste

= 4 pounds per unit

per unit cost:

= 2(1 - 0.02 cash discount) + 0.25 freight

= (2 × 0.98) + 0.25

= 1.96 + 0.25

= $ 2.21 per pound

Direct labor cost

= Hours used to produce unit × Per hour cost

= (1 + 0.20 ) ($12.70 + $2)

= 1.20 × $14.70

= $17.64 per unit

Manufacturing overhead:

= $6.40 × (1 + 0.20)

= 4.50 × 1.20

= $5.40 per unit

Total standard cost per unit:

= 8.84 + $17.64 + $5.40

= $ 31.88 per unit