I need some help with this. Everytime I think I get it right, it ends up being w
ID: 2491184 • Letter: I
Question
I need some help with this. Everytime I think I get it right, it ends up being wrong. Thanks!
A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad:
The piece of sheet metal from which 8 pad cases can be made costs $0.18. This amount is based on the number of sheets in a 3,000-pound bundle of sheet metal, which is the usual purchase quantity. The foam pad that is put in the case costs $0.07, based on the number of pads that can be cut from a large roll of foam. Production standards, based on engineering analysis recognizing attainable performance, provide for the manufacture of 1,840 pads by 6 workers in an eight-hour shift. The standard direct labor pay rate is $11.3 per hour. Manufacturing overhead is applied to units produced using a predetermined overhead application rate of $19.0 per direct labor hour, of which $6.6 per hour is fixed manufacturing overhead. Required: a. Calculate the standard absorption cost of a package of 18 stamp pads Standard absorption cost per package: Stamper Manufacturing Co.'s management is considering a special promotion that would result in increased sales of 2,600 packages of 18 pads per package. Calculate the cost per package that is relevant for this analysis. Relevant cost per package
Explanation / Answer
Answer
Answer 1
Production standards provide for manufacture of 1,840 pads by 6 workers in an eight-hour shift.
So Total hours = 6 workers * 8 hours = 48 hours
Time (hours) required for 1 pad = 48 hours / 1,840 pads = 0.026087 hour
Labour cost per 1 pad = 0.026087 hour *$11.3 per hour
=$ 0.2948
Total Manufacturing overhead for 1 pad = 0.026087 hour *$19.0 per direct labor hour
=$ 0.4957
Particulars
Figures in $
Cost per pad
sheet metal cost
a
0.0225
(0.18/8)
foam pad cost
b
0.07
labor cost (as calculated above)
c
0.2948
Manufacturing overhead cost (as calculated above)
d
0.4957
Total cost per unit (a+b+c+d)
e
0.883
Total stamp pads in package
f
18
Standard absorption cost per package (e*f)
15.89
Answer 2
Variable Manufacturing overhead for 1 pad = 0.026087 hour *( $19.0 - $6.6 ) per direct labor hour
=0.026087 hour * $ 12.4 per direct labor hour
= 0.3235
Figures in $
Cost per pad
sheet metal cost
a
0.0225
(0.18/8)
foam pad cost
b
0.07
labor cost (as calculated above)
c
0.2948
Variable Manufacturing overhead cost (as calculated above)
d
0.3235
Total cost per unit (a+b+c+d)
e
0.7108
Total stamp pads in package
f
18
Relevant cost per package (e*f)
12.79
Particulars
Figures in $
Cost per pad
sheet metal cost
a
0.0225
(0.18/8)
foam pad cost
b
0.07
labor cost (as calculated above)
c
0.2948
Manufacturing overhead cost (as calculated above)
d
0.4957
Total cost per unit (a+b+c+d)
e
0.883
Total stamp pads in package
f
18
Standard absorption cost per package (e*f)
15.89