Question

Skysong Itzek manufactures and sells homemade wine, and he wants to develop a standard cost per gallon. The following are required for production of a 50-gallon batch. 3,800 ounces of grape concentrate at $0.07 per ounce 54 pounds of granulated sugar at $0.45 per pound 60 lemons at $0.70 each 150 yeast tablets at $0.28 each 200 nutrient tablets at $0.17 each 1,900 ounces of water at $0.005 per ounce Skysong estimates that 5% of the grape concentrate is wasted, 10% of the sugar is lost, and 25% of the lemons cannot be used. Compute the standard cost of the ingredients for one gallon of wine. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.) Standard Cost Per Gallon $

Answer 1

Answer:

Skysong Itzek

Standard Cost Per Gallon = $8.36

Explanation:

a) Data and Calculations:

Requirements for the production of a 50-gallon batch:

Materials                                         Quantity       Price               Total costs

Ounces of grape concentrate         3,800      $0.07/ounce           $266.00

Pounds of granulated sugar                 54      $0.45/pound               24.30

Lemons                                                  60      $0.70 each                  42.00

Tablets of yeast                                   150       $0.28 each                 42.00

Tablets of nutrient                              200       $0.17 each                  34.00

Ounces of water                              1,900        $0.005/ounce             9.50

Total costs                                                                                         $417.80

Standard cost per unit  = Total material costs/Batch Quantity

= $417.80/50 = $8.36

b) Since the estimated wastages of grape concentrate, sugar, and lemons are of no further use, the full costs of the direct materials are used in determining the standard cost.  The standard cost is, therefore, equal to the total material costs divided by the batch quantity.