- A chemical process begins with 10 kilograms of raw material costing $5 per kilogram. The process is expected to yield 80 good units of finished product. No other materials are added. What is the standard direct material cost per good finished unit?
Answer: $0.625
This calculation requires determining the total input cost and spreading it over the expected good output. The total cost of material input for the process is 10 kg∗$5/kg=$50. This total cost must be absorbed by the good units produced. With an expected yield of 80 good units, the standard cost per good unit is $50/80 units=$0.625. - An engineering change is proposed for a product. The old standard required 4 kg of material at $10/kg and 2 DL hours at $25/hr. The new standard would require 3.5 kg of material at $10/kg but 2.2 DL hours at the same $25/hr rate. What is the expected change in total standard prime cost per unit resulting from this proposal?
Answer: $0 change
Calculate the total prime cost under both the old and new standards and find the difference. Old prime cost = (4 kg $10/kg) + (2 hrs $25/hr) = $40 + $50 = $90. New prime cost = (3.5 kg $10/kg) + (2.2 hrs $25/hr) = $35 + $55 = $90. The change in total standard prime cost is $90 (new) - $90 (old) = $0.
- A company's standard for raw material includes a cash discount for prompt payment, as its policy is to always take such discounts. The material's invoice price is $40.00 per liter. The supplier's terms are 2/10, n/30. Shipping costs are $1.50 per liter, and receiving and handling costs are $0.50 per liter. What is the standard price per liter for this material?
Answer: $41.20
The standard price should reflect the net cash paid for the material. Start with the invoice price of $40.00. Calculate the cash discount: $40.00 * 2% = $0.80. The net invoice price is $40.00 - $0.80 = $39.20. Add the other necessary costs to get the material ready for use: $39.20 + $1.50 (shipping) + $0.50 (handling) = $41.20.
- To set its fixed overhead rate, a company uses practical capacity as the denominator level of activity. Budgeted fixed overhead is $720,000 per year. Theoretical capacity is 50,000 machine hours, while practical capacity is 80% of theoretical. The master budget forecast for the year is based on expected sales of 18,000 units, which would require 36,000 machine hours. What is the standard fixed overhead rate per machine hour?
Answer: $18.00
The standard FOH rate should be calculated using the specified denominator level, which is practical capacity. First, calculate practical capacity: 50,000 theoretical hours∗80. Then, calculate the rate: Budgeted FOH / Practical Capacity = $720,000/40,000 MH=$18.00 per MH. Using theoretical capacity or expected actual activity (master budget) would be incorrect. - A manufacturing process requires a team of two workers: one senior technician and one junior apprentice. The standard time to complete one batch is one hour for the team. The senior technician's base rate is $32 per hour, and the junior apprentice's is $20 per hour. The company incurs payroll taxes of 8% and fringe benefit costs of 12%, both calculated on the base wage rates. What is the standard direct labor cost to be set for one batch?
Answer: $62.40
The standard direct labor cost includes the base wages for the entire team plus all variable labor-related on-costs. First, calculate the combined base wage rate for the team: $32+$20=$52. Next, calculate the total percentage for on-costs: 8% for payroll taxes + 12% for fringe benefits = 20%. Apply this to the base rate: $52 * 1.20 = $62.40. Since the standard time is one hour, the standard cost per batch is $62.40. - A finished product, L-200, is made from two raw materials: Alpha and Beta. The standard usage and prices are as follows: Alpha requires 3 pounds per unit at a standard price of $4 per pound. Beta requires 2 pounds per unit at a standard price of $7 per pound. What is the total standard direct material cost for one unit of L-200?
Answer: $26.00
The total standard direct material cost is the sum of the standard costs for each individual material. For Alpha, the standard cost is 3 lbs∗$4/lb=$12. For Beta, the standard cost is 2 lbs∗$7/lb=$14. The total standard DM cost per unit is $12 + $14 = $26. - A time-and-motion study for producing one unit of Product Delta yielded the following data: direct assembly and machine setup time combined, 60 minutes; allowance for breaks and personal needs, 20% of assembly and setup time; and final quality control inspection, 3 minutes. What are the standard direct labor hours per unit of Product Delta?
Answer: 1.25 hours
Standard labor hours should include all time necessary to complete the task under normal operating conditions. This includes run time, setup, and allowances for breaks and other activities. The calculation is: Assembly and setup (60 minutes) + Break allowance (60 minutes * 20% = 12 minutes) + Inspection time (3 minutes) = 75 minutes. To convert to standard hours, divide by 60: 75 minutes/60 minutes/hour=1.25 hours. - The partially complete standard cost card for a product shows the following: Direct materials, $40; Direct labor, ?; Variable overhead, $12; Fixed overhead, $18; Total standard cost, $100. If the standard direct labor rate is $25 per hour, what is the standard number of direct labor hours per unit?
Answer: 1.20 hours
First, find the missing standard direct labor cost per unit by subtracting all other costs from the total: $100 (Total) - $40 (DM) - $12 (VOH) - $18 (FOH) = $30. This $30 is the standard direct labor cost per unit. To find the standard hours, divide this cost by the standard rate: $30 / $25 per hour = 1.20 hours.
- Phoenix Industries produces automotive parts using standard costing. The engineering department has established that each finished unit should require 4.2 kilograms of Material X at $12.60 per kilogram and 1.8 kilograms of Material Y at $18.40 per kilogram. Due to normal waste and spillage, an additional 5% of total material cost should be added to the standard. What is the standard direct materials cost per unit?
Answer: $90.54
Material X cost = 4.2 kg × $12.60 = $52.92. Material Y cost = 1.8 kg × $18.40 = $33.12. Subtotal = $52.92 + $33.12 = $86.04. Adding 5% for waste: $86.04 × 1.05 = $90.54. Choice A omits the waste allowance. Choice B uses incorrect calculation of waste. Choice D incorrectly applies 5% to each material separately before combining.
- A liquid raw material is purchased for $8.00 per liter. The material must be shipped in special non-refundable containers that cost $50 each and hold 200 liters. What is the total standard cost per liter for this material, including the cost of the container?
Answer: $8.250
The standard cost must include all non-refundable costs associated with acquiring the material. First, calculate the cost of the container on a per-liter basis: $50 container cost / 200 liters per container = $0.25 per liter. Then, add this to the purchase price of the material itself: $8.00 per liter + $0.25 per liter = $8.25 per liter.
- Sterling Corp. applies fixed manufacturing overhead based on direct labor hours. The company's annual budget includes $960,000 of fixed manufacturing overhead. The denominator level of activity is set at 80,000 direct labor hours, which is the plant's practical capacity. The standard labor requirement for one unit of product is 0.5 direct labor hours. During the year, the company actually worked 75,000 hours. What is the standard fixed overhead cost per finished unit?
Answer: $6.00
The standard fixed overhead cost per unit is based on budgeted, not actual, data. First, calculate the standard FOH rate per direct labor hour: Budgeted FOH / Denominator DLH = $960,000/80,000 DLH=$12.00 per DLH. Then, multiply this rate by the standard labor hours per unit: $12.00/\text{DLH} * 0.5 \text{ DLH/unit} = $6.00. The actual hours worked are irrelevant for setting the standard. - Atlas Corporation manufactures widgets using a standard costing system. Direct labor standards call for 2.8 hours per unit at a rate of $16.50 per hour. Variable overhead is applied at $7.25 per direct labor hour, while fixed overhead is applied at $4.80 per direct labor hour based on normal capacity of 25,000 direct labor hours. What is the total standard cost per unit for direct labor and overhead combined?
Answer: $59.94
Standard direct labor cost = 2.8 hours × $16.50 = $46.20. Standard variable overhead = 2.8 hours × $7.25 = $20.30. Standard fixed overhead = 2.8 hours × $4.80 = $13.44. Total standard cost = $46.20 + $20.30 + $13.44 = $59.94. Choice A includes only direct labor. Choice B omits fixed overhead. Choice D incorrectly uses 25,000 hours in the calculation.
- ZY Corp manufactures a finished product that requires 4.2 kilograms of a specific chemical after processing. During production, it is considered normal for 10% of the chemical input to be lost through evaporation. Additionally, an unavoidable residue of 0.3 kilograms per unit must be filtered out and disposed of. What is the standard quantity of the chemical (in kilograms) that should be established for one finished unit?
Answer: 5.00 kg
The standard quantity must account for all normal production losses to arrive at the required good output. First, determine the amount of material needed before the evaporation loss. This is the net good material (4.2 kg) plus the residue (0.3 kg), which equals 4.5 kg. This 4.5 kg represents 90% of the initial input before evaporation (100% - 10% loss). To find the total standard quantity, divide 4.5 kg by 90%: 4.5 kg/(1−0.10)=5.00 kg. - PQR Company applies variable manufacturing overhead based on machine hours. For the upcoming period, the company budgeted total variable overhead of $150,000, 25,000 machine hours, and 30,000 direct labor hours. Engineering analysis indicates that producing one finished unit requires 0.40 standard machine hours. What is the standard variable overhead cost per finished unit?
Answer: $2.40
First, calculate the predetermined variable overhead rate using the appropriate allocation base, which is machine hours. Standard VOH Rate = Budgeted VOH / Budgeted Machine Hours = $150,000/25,000 MH=$6.00 per MH. Then, multiply this rate by the standard quantity of the allocation base per unit: Standard VOH Cost per Unit = $6.00/\text{MH} * 0.40 \text{ MH/unit} = $2.40. - Delta Corporation uses standard costing for its chemical processing operation. Each batch requires 180 liters of Chemical A at $4.25 per liter and 220 liters of Chemical B at $6.80 per liter. Due to evaporation losses during processing, an additional 3% of Chemical A and 7% of Chemical B must be included in the standard. If each batch yields 850 finished units, what is the standard direct materials cost per unit?
Answer: $2.81
Chemical A needed = 180 × 1.03 = 185.4 liters at $4.25 = $787.95. Chemical B needed = 220 × 1.07 = 235.4 liters at $6.80 = $1,600.72. Total materials cost per batch = $787.95 + $1,600.72 = $2,388.67. Cost per unit = $2,388.67 ÷ 850 units = $2.81.
- A production standard requires 4 direct labor hours per unit. Due to a predictable evening shift schedule, the standard specifies that 3 of these hours will be at the regular rate of $24 per hour, and 1 hour will be at an overtime premium rate of time-and-a-half. What is the standard direct labor cost for one unit?
Answer: $108.00
The standard cost should reflect the planned mix of regular and overtime hours. First, calculate the overtime rate: $24 1.5 = $36 per hour. Then, calculate the cost for each portion of the labor: Regular time cost = 3 hours $24/hour = $72. Overtime cost = 1 hour * $36/hour = $36. The total standard direct labor cost per unit is the sum: $72 + $36 = $108.00.
- A company is developing standards for the prime cost of a new product. Each unit requires 2.85 meters of material in the finished good, but a normal scrap rate of 5% of materials started is expected. The standard price of the material is $20 per meter. The standard for direct labor is 1.5 hours per unit at a standard rate of $22 per hour. What is the total standard prime cost per unit?
Answer: $93.00
Prime cost is the sum of direct materials and direct labor. First, calculate the standard DM cost. The standard quantity must account for scrap: 2.85 meters/(1−0.05)=3.0 meters. Standard DM cost = 3.0 meters∗$20/meter=$60.00. Second, calculate the standard DL cost: 1.5 hours∗$22/hour=$33.00. Total standard prime cost = $60.00 + $33.00 = $93.00. - Management wants to set a practical standard for the direct material cost of a product. Ideal engineering standards specify 5.0 kg of material per unit at a price of $10.00/kg available only from bulk, undiscounted purchases. A practical standard would include an allowance for 0.2 kg of normal waste and use a more realistic price of $10.50/kg from a regular supplier. What is the direct material cost per unit based on a practical standard?
Answer: $54.60
A practical standard is one that is 'tight but attainable' and includes allowances for normal operating interruptions and waste. The practical quantity is the ideal quantity plus the allowance for waste: 5.0 kg+0.2 kg=5.2 kg. The practical price is the realistic price of $10.50/kg. The standard cost is the product of these two practical figures: 5.2 kg∗$10.50/kg=$54.60. - A company is developing the standard price for a key raw material, Part #AX-5. The supplier's list price is $25.00 per kilogram. The company receives a 4% trade discount on all purchases. Non-refundable shipping costs are $1.20 per kilogram. Each shipment undergoes a mandatory quality inspection costing $300 for every 500-kilogram batch. What is the standard cost per kilogram for Part #AX-5?
Answer: $25.80
The standard cost per unit of direct material should include all costs to get the material ready for use. This includes the net purchase price plus any freight and inspection costs. The calculation is: List price ($25.00) less 4% trade discount ($25.00 * 0.04 = $1.00\), plus shipping cost ($1.20\), plus the per-kilogram inspection cost ($300 / 500 kg = $0.60\). The total standard cost is $24.00+$1.20+$0.60=$25.80. - Meridian Manufacturing uses standard costing for its product line. The following information is available for direct materials: Standard quantity per unit is 3.5 pounds, with a standard price of $8.20 per pound. During March, the company purchased 15,000 pounds at $8.35 per pound and used 14,200 pounds to produce 4,000 units. If the company includes purchase price variance in its standard cost calculation for inventory valuation purposes, what is the standard cost per unit for direct materials?
Answer: $28.70
Standard cost per unit for direct materials = Standard quantity per unit × Standard price per pound = 3.5 pounds × $8.20 = $28.70. The actual quantities purchased and used, as well as actual prices paid, do not affect the standard cost per unit calculation. Standard costs are predetermined benchmarks used for planning and control purposes.
