Question

Orange Corporation is developing standards for its products. Product A requires a material that is purchased for $80.00 per pound from the supplier. By paying cash, the company gets a discount of 3% off this purchase price. Shipping costs from the supplier's warehouse amount to $6.66 per pound. Receiving costs are $0.45 per pound. Each unit of product A requires 0.96 pound of this material. The allowance for waste and spoilage is 0.05 pound and the allowance for rejects is 0.09 pound of this material for each unit of product A.

Required:

(A) Determine the standard price per pound of this material.
(B) Determine the standard pounds of this material per unit of product A.

Answer 1

(A) The standard price per pound of this material is $87.11

(B) The standard pounds of this material per unit of product A is 1.01 pounds

Step-by-step explanation:

According to the given data, in order to calculate the standard price per pound of this material, we would have to use the following formula:

Standard Price per pound of this material=Purchase Price Per Pound + Shipping Cost per pound +Receiving Cost

=$80.00+$6.66+$0.45

=$87.11

In order to calculate the standard pounds of this material per unit of product A, we would have to use the following formula:

Standard pounds of this material per unit of Product A=Pounds of material required by Product A +Allowance for waste and spoilage

=0.96+0.05

=1.01 pounds