Question

The Juice 4 Kids Company makes individual juice boxes containing 100% fruit juice. Materials for each juice box include: 5 ounces of juice costing $0.03 per ounce, 1 box costing $0.04, and 1 straw costing $0.01. The company allows $0.01 per box for spillage during the production process. The standard wage rate is $9.50 per hour, and each juice box requires .02 hours to produce. Total overhead is $750,000, allocated based on direct labor cost, which is expected to be $1,000,000 for the year. As company accountant, your task is to determine the current standard cost for a box of juice. What is your finding?

Answer 1

Answer:

Total cost per juice     3.525

Explanation:

direct materials

standard quantities

5 ounces

1 box

1 straw

standard cost:

$0.03 per ounce

$0.04 per box

$0.01 per straw

standard direct material cost per juice $0.15 + $0.04 + $0.01 = $0.20

Direct Labor

Standard hours 0.2

Standard rate $9.50

standard Direct labor cost per juice: $9.50 x 0.2 = $1.90

Overhead

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

The total manufacturing cost will be distribute among a cost driver. in this case, the labor cost:

750,000/1,000,000 = 0.75

Overhead rate 0.75

Labor cost per juice $1.90

Standard Overhead  $1.425

Total cost:

Direct Materials 0.20

Direct Labors     1.90

Overhead           1.425

Total cost           3.525