Parsons Company is planning to produce 2800 units of product

Parsons Company is planning to produce 2,800 units of product in 2017. Each unit requires 2.60 pounds of materials at $7.00 per pound and a half-hour of labor at $14.00 per hour. The overhead rate is 80% of direct labor. Compute the budgeted amounts for 2017 for direct materials to be used, direct labor, and applied overhead. Direct materials Direct labor Overhead Compute the standard cost of one unit of product. (Round answer to 2 decimal places, e.g. 2.75.) Standard cost

Solution

1) Calculate budgeted amount :

Direct material = 2800*2.6*7 = $50960

Direct labour = 2800*.50*14 = $19600

Overhead = 19600*80% = $15680

b) Standard cost per unit = (50960+19600+15680)/2800 = $30.80

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