Question

Stefani Company has gathered the following information about its product. Direct materials: Each unit of product contains 4.50 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.50 pounds. Materials cost $5 per pound, but Stefani always takes the 2.00% cash discount all of its suppliers offer. Freight costs average $0.25 per pound. Direct labor. Each unit requires 2.00 hours of labor. Setup, cleanup, and downtime average 0.40 hours per unit. The average hourly pay rate of Stefani’s employees is $12.00. Payroll taxes and fringe benefits are an additional $3.00 per hour. Manufacturing overhead. Overhead is applied at a rate of $7.00 per direct labor hour.

Answer 1

Answer:

The right solution is "$78.55".

Explanation:

The given values are:

Material cost,

= $5 per pound

Average freight costs,

= $0.25 per pound

Downtime average,

= 0.40 hours per unit

According to the question,

The direct material cost per unit will be:

=  $((4.5+0.5)\times 5\times 0.98)+(0.25\times (4.5+0.5))$

=  $(5\times 5\times 0.98)+(0.25\times 5)$

=  $24.5+1.25$

=  $25.75$ ($)

The direct labor will be:

=  $((2.0+0.4)\times 12)+(3\times (2.0+0.4))$

=  $28.8+7.2$

=  $36$ ($)

Manufacturing overhead will be:

=  $(2.0+0.4)\times 7$

=  $2.4\times 7$

=  $16.8$ ($)

hence,

The standard cost per unit will be:

=  $Direct \ material+Direct \ labor+Manufacturing \ overhead$

=  $25.75+36+16.8$

=  $78.55$ ($)