Final answer:
The standard cost of direct labor per unit is calculated by multiplying the standard quantity of direct labor by the standard price of direct labor. This calculation is an essential part of financial planning for firms to estimate costs per unit produced.
Step-by-step explanation:
The standard cost of direct labor per unit is calculated by multipling the standard quantity of direct labor by the standard price of direct labor. This method allows companies to estimate the labor costs associated with the production of one unit of their product or service. It is a crucial aspect of budgeting and cost control.
When a firm wants to determine the cost of direct labor for each unit produced, it would take the amount of labor that is expected to be necessary (standard quantity) and multiply it by how much that labor is expected to cost (standard price). This allows the firm to set a predetermined rate for labor costs against which actual performance can be compared.
For instance, if producing a widget typically requires 2 hours of labor, and the company pays workers $20 per hour, the standard cost would be calculated as 2 hours (standard quantity) x $20 per hour (standard price) = $40 per unit. Thus, the standard cost of direct labor per unit would be $40.