Exercise 1 - Stefani Company has gathered the following information about its product.
Direct materials: Each unit of product contains 3.10 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.30 pounds. Materials cost $2 per pound, but Stefani always takes the 4.00% cash discount all of its suppliers offer. Freight costs average $0.45 per pound.
Direct labor. Each unit requires 1.30 hours of labor. Setup, cleanup, and downtime average 0.20 hours per unit. The average hourly pay rate of Stefani's employees is $12.50. Payroll taxes and fringe benefits are an additional $2.40 per hour.
Manufacturing overhead. Overhead is applied at a rate of $7.20 per direct labor hour.
Compute Stefani's total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)
Exercise 2 - Monte Services, Inc. is trying to establish the standard labor cost of a typical oil change. The following data have been collected from time and motion studies conducted over the past month.
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Actual time spent on the oil change
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1.0 hour
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Hourly wage rate
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$11
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Payroll taxes
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12% of wage rate
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Setup and downtime
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8% of actual labor time
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Cleanup and rest periods
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28% of actual labor time
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Fringe benefits
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21% of wage rate
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Determine the standard direct labor hours per oil change.
Determine the standard direct labor hourly rate.
Determine the standard direct labor cost per oil change.
Exercise 3 - Lewis Company's standard labor cost of producing one unit of Product DD is 3.8 hours at the rate of $10.3 per hour. During August, 40,200 hours of labor are incurred at a cost of $10.50 per hour to produce 10,500 units of Product DD.
(a) Compute the total labor variance.
(b) Compute the labor price and quantity variances.
(c) Compute the labor price and quantity variances, assuming the standard is 4.2 hours of direct labor at $10.70 per hour.
Exercise 4 - The steps in management's decision-making process are listed in random order below. Indicate the order in which the steps should be executed.
Make a decision
Identify the problem and assign responsibility
Review results of the decision
Determine and evaluate possible courses of action
Exercise 5 - Bogart Company is considering two alternatives. Alternative A will have revenues of $148,000 and costs of $104,200. Alternative B will have revenues of $188,000 and costs of $123,800. Compare Alternative A to Alternative B showing incremental revenues, costs, and net income.
Exercise 6 - Manson Industries incurs unit costs of $7 ($4 variable and $3 fixed) in making an assembly part for its finished product. A supplier offers to make 17,000 of the assembly part at $5 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Manson will realize by buying the part.