Solutions Guide: Please reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own. Vintech Company is planning to produce 2,000 units of product in 2011. Each unit requires 3 pounds of materials at $6 per pound and a half hour of labor at $14 per hour. The overhead rate is 70% of direct labor. (a)compute the budgeted amounts for 2011 for direct materials to be used, direct labor, and applied overhead. (b)compute the standard cost of one unit of product. (c)what are the potential advantages to a corporation of using standard costs? (a) Direct materials: (2,000 X 3) X $6 = $36,000 Direct labor: (2,000 X 1/2) X $14 = $14,000 Overhead: $14,000 X 70% = $ 9,800 (b) Direct materials: 3 X $6 = $18.00 Direct labor: 1/2 X $14 = 7.00 Overhead: $7 X 70% = 4.90 Standard cost: $29.90 (c) The advantages of standard costs which are carefully established and prudently used are: 1. Management planning is facilitated. 2. Greater economy is promoted by making employees more cost-conscious. 3. Setting selling prices is facilitated. 4. Management control is enhanced by having a basis for evaluation of cost control. 5. Variances are highlighted in management by exception. 6. Costing of inventories is simplified and clerical costs are reduced
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