Question

Seven Manufacturing Corporation uses both standards and budgets. The company estimates that production for the year will be 100,000 units of Product Fast. To produce these units of Product Fast, the company expects to spend $600,000 for materials and $800,000 for labor.a. Compute the estimates for a standard cost.i. Materials ii. Labor b. Compute the estimates for a budgeted cost.i. Total Materials Costii. Total Labor Cost

Answer 1

Answer:

a.

i. $6

ii. $8

b.

i. $600,000

ii. $800,000

Explanation:

a. Standard Cost is the cost which is stated or described as the amount which is per unit.

i. For materials

Standard Cost = Expected amount to be spend on materials / Units

= $600,000 / 100,000

= $6

ii. For labor

Standard Cost = Expected amount to be spend on labor / Units

= $800,000 / 100,000

= $8

b. Budgeted cost are those costs which are stated as the total or aggregate amount.

i. For total material cost

Budgeted cost for the year = Expected or total cost spend on materials

= $600,000

ii. For total labor cost

Budgeted cost for the year = Expected or total cost spend on labor

= $800,000