Question

Any company that purchases the new model will need to purchase user manuals to access and operate the system. Also required are specialized computer forms that are sold only by Wildhorse Professionals. User manuals will be sold to clients in cases of 24, at a cost of $402 per case. One manual must be used each time the model is run because each manual includes a non-reusable computer password for operating the system. The specialized computer forms are sold in packages of 310 at a cost of $62 per package. One application of the model requires the use of 60 forms. This amount includes two forms that are generally wasted in each application due to printer alignment errors. The overall cost of the strategic planning model to user clients is $15,000. Most clients will use the model four times each year. Wildhorse Professionals must provide its clients with estimates of ongoing costs that are incurred in operating the new strategic planning model. They would like to provide this information in the form of standard costs.

Determine the standard materials cost associated with the user manuals and computer forms for each application of the strategic planning model.

Answer 1

The standard materials cost associated with the user manuals and computer forms for each application of the strategic planning model is $67 for user manuals and $0.795 for computer forms.

Step-by-step explanation:

The standard materials cost associated with the user manuals and computer forms for each application of the strategic planning model can be calculated as follows:

User manuals: Each application of the model requires the use of one manual, and each case of manuals contains 24 manuals. Since there are 4 applications per year, the total number of manuals required for a year is 4. Therefore, the number of cases required per year is 4 divided by 24, which equals 1/6. The cost of one case of user manuals is $402, so the standard cost of user manuals per application is 1/6 multiplied by $402, which equals $67.

Computer forms: Each application of the model requires the use of 60 forms, and each package contains 310 forms. Since there are 4 applications per year, the total number of packages required for a year is 4. Therefore, the number of packages required per application is 4 divided by 310, which equals 1/78 (rounded to three decimal places). The cost of one package of computer forms is $62, so the standard cost of computer forms per application is 1/78 multiplied by $62, which equals $0.795.

The standard materials cost associated with the user manuals and computer forms for each application of the strategic planning model is $67 for user manuals and $0.795 for computer forms.