Week 7, LO 1 Demo

# Week 7, LO 1 Demo - Example Basic Labor Time per Unit(hours...

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Week 7: Standard Costs Week 7 Skill Building Demonstration Problem 1 Explain how direct materials standards and direct labor standards are set. Learning Objective 1 Standard Price per Unit- direct materials should reflect the Final, delivered cost of materials, net of discounts. Example: Purchase Price \$ 2.00 Freight 0.27 Less Discount (.07) Standard Price per unit \$ 2.20 Standard Quantity per Unit- Direct Materials should reflect the amount of materials required for each unit of finished product, as well as any allowance for unavoidable waste, spoilage, and other normal inefficiencies. Example: Material Requirements specified in the bill of materials \$ 1.00 Allowance for waste 0.10 Allowance for rejects 0.10 Standard Quantity per unit \$ 1.20 Standard Rate per Unit- for direct labor should include wages, employment taxes, and fringe benefits. Example: Basic wage rate \$ 5.00 Employment taxes 10% 0.50 Fringe Benefits 20% 1.10 Standard rate per direct labor-hours \$ 6.50 Standard Hours per Unit- Standard direct labor time to complete a unit of product.

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Unformatted text preview: .. Example: Basic Labor Time per Unit (hours) 2.0 Allowance for Breaks/Personal Needs 0.1 Allowance for Cleanup 0.2 Definitions & Examples Allowance for Rejects 0.3 Standard Labor-hours per Unit of Product 2.6 *Standard Labor Cost per Unit: \$6.50 x 2.6 = \$16.9 The following are general models used with standard cost to analyze variances as described in the textbook (page 343 EXHIBIT 8-3) : Price and Quantity Variances: The following information is available to make 1 unit of Product ZZXX : Inputs Standard Quantity or Hours Standard Price or Rate Standard Cost per Unit Direct materials 2 \$5.00 per lb Direct labor 3.5 15.00 per hour Variable manufacturing overhead 2.5 3.00 per hour Total std unit cost ??? Problem Inputs Standard Standard Price or Standard Cost per Solution Quantity or Hours Rate Unit Direct materials 2 \$ 5.00 per lb \$ 10.00 Direct labor 3.5 15.00 per hour 52.50 Variable manufacturing overhead 2.5 3.00 per hour 7.50 Total std unit cost \$ 70.00...
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