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One unit needs 8.6 pounds at $6.00 a pound, 5 hours at $10.00 an hour and 1 hour of factory overhead at $12.00 an hour. What is the standard cost per unit?
A$101.60
B$113.00
C$113.60
D$125.60
Answer & Solution
Correct answer: C. $113.60
1. Direct materials: 8.6 pounds times $6.00 gives $51.60 per unit.
2. Direct labour: 5 hours times $10.00 gives $50.00 per unit.
3. Factory overhead: 1 hour times $12.00 gives $12.00 per unit.
4. Adding the three product costs gives $51.60 plus $50.00 plus $12.00, which is $113.60.
5. $101.60 leaves out the factory overhead element entirely.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 8.1 Introduction_
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