Question

Jake’s Cheese Company produces gourmet cheese for resale at local grocery stores. The master budget indicates that the company expects to use 3.0 pounds of direct materials for each unit produced at a cost of $8.00 per pound (one unit = one batch of cheese). Each unit produced will require 0.50 direct labor hours at a cost of $10.00 per hour. Variable manufacturing overhead is applied based on direct labor hours at a rate of $5.00 per hour. Last year's sales were expected to total 50,000 units. Jake just received last year's actual results showing sales of 45,000 units.

Required:
Calculate the standard cost per unit for direct materials, direct labor, and variable manufacturing overhead.

Answer 1

The standard cost per unit for Jake’s Cheese Company is calculated by adding the costs of direct materials ($24.00 per unit), direct labor ($5.00 per unit), and variable manufacturing overhead ($2.50 per unit), resulting in a total of $31.50 per unit.

Step-by-step explanation:

Standard Cost Per Unit Calculation

The standard cost per unit for direct materials, direct labor, and variable manufacturing overhead for Jake’s Cheese Company can be calculated as follows:

• Direct Materials Cost: The cost is $8.00 per pound and the standard quantity is 3.0 pounds per unit. Therefore, the standard cost for direct materials per unit is 3.0 pounds × $8.00 per pound = $24.00 per unit.
• Direct Labor Cost: The cost is $10.00 per hour and the standard time is 0.50 hours per unit. Thus, the standard cost for direct labor per unit is 0.50 hours × $10.00 per hour = $5.00 per unit.
• Variable Manufacturing Overhead Cost: This is applied on direct labor hours at a rate of $5.00 per hour. Hence the standard variable overhead per unit is 0.50 hours × $5.00 per hour = $2.50 per unit.

By adding these costs together, we get the total standard cost per unit. Thus, the total standard cost per unit is $24.00 + $5.00 + $2.50 = $31.50 per unit.