Kimm Company has gathered the following information about it

Kimm Company has gathered the following information about its product.

Direct materials: Each unit of product contains 4.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.40 pounds. Materials cost $3 per pound, but Kimm always takes the 3.86% cash discount all of its suppliers offer. Freight costs average $0.29 per pound.

Direct labor. Each unit requires 1.70 hours of labor. Setup, cleanup, and downtime average 0.29 hours per unit. The average hourly pay rate of Kimm’s employees is $12.10. Payroll taxes and fringe benefits are an additional $2.60 per hour.

Manufacturing overhead. Overhead is applied at a rate of $5.80 per direct labor hour.

Compute Kimm’s total standard cost per unit.

Solution

Pounds of materials = 4.1+0.4 = 4.5

Direct materials = Material cost + Freight

= (4.5 pounds * 3 per pound * 96.14%) + (4.5 per pound *0.29 per pound)

= 12.9789 + 1.305

= 14.2839

Labour hours = 1.7 + 0.29 = 1.99

Direct labour = Labour pay + Payroll taxes and fringe benefits  

= (1.99 hours * 12.1 per hour) + (1.99 hours * 2.6 per hour)

= 24.079 + 5.174

= 29.253

Manufacturing overhead = Direct labour hours * 5.8 per unit

= 1.99 hours * 5.8 per direct lanour hour

= 11.542

Total standard cost per unit = Direct materials + Direct labour + Manufacturing overhead

= 14.2839 + 29.253 + 11.542

= 55.0789