ABC Company’s budgeted sales for June, July, and August are 12,000, 16,000, and
ID: 2451170 • Letter: A
Question
ABC Company’s budgeted sales for June, July, and August are 12,000, 16,000, and 14,000 units respectively. Each unit that ABC Company produces uses 3 pounds of raw material. ABC requires 25% of the next month’s budgeted production as raw material inventory each month. ABC Company currently pays a standard rate of $1 per pound for raw materials. Each unit should be produced in 15 minutes of direct labor time at a standard direct labor rate of $12 per hour. Manufacturing overhead is applied at the standard rate of $16 per direct labor hour.
ABC Company’s budgeted sales for June, July, and August are 12,000, 16,000, and 14,000 units respectively. Each unit that ABC Company produces uses 3 pounds of raw material. ABC requires 25% of the next month’s budgeted production as raw material inventory each month. ABC Company currently pays a standard rate of $1 per pound for raw materials. Each unit should be produced in 15 minutes of direct labor time at a standard direct labor rate of $12 per hour. Manufacturing overhead is applied at the standard rate of $16 per direct labor hour.
Calculate the standard cost per unit for ABC Company?Explanation / Answer
For calculating the standard cost per unit for ABC Company, we first need to work out the raw material purchases, based on which we can work out the cost per unit Raw Material Purchase Base $ $ Opening RM Inventory 3000 Purchase of Raw Materials 37000 Balancing Figure Production of RM 36000 Closing RM 4000 Cost of Raw Materials = 37000 Cost of Labour Time for production of units 180000 minutes Time for production in hours 3000 hours Standard Labour Cost 36000 $ Manufacturing Overhead Cost 48000 $ Total Production Cost for 12,000 units in June 121000 Standard Cost per unit 10.08 $