ABC Company’s budgeted sales for June, July, and August are 15,800, 19,800, and
ID: 2438492 • Letter: A
Question
ABC Company’s budgeted sales for June, July, and August are 15,800, 19,800, and 17,500 units respectively. Each unit that ABC Company produces uses 2 pounds of raw material. ABC requires 35% of the next month’s budgeted production as raw material inventory each month. ABC Company currently pays a standard rate of $1.3 per pound for raw materials. Each unit should be produced in 30 minutes of direct labor time at a standard direct labor rate of $12.4 per hour. Manufacturing overhead is applied at the standard rate of $16.4 per direct labor hour.
Required:
Calculate the standard cost per unit for ABC Company. (Round your answer to 2 decimal places.)
Explanation / Answer
Answer;
Standard Cost = Direct Material + Direct Labor + Manufacturing Overhead
Direct Material Cost per unit = $1.30
Direct Labor Cost per unit = ($12.40 * 30/60) = $6.20
Manufacturing Overhead Cost per unit = ($16.40* 30/60) = $8.20
Standard Cost per Unit = $1.30 + $6.20 + $8.20
Standard Cost per Unit = $15.70