Kandy Harts manufactures custom T-shirts. Each T-shirt can be imprinted front and back with photos, company logos or other information. Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging. The following information is available regarding costs:
|Short-sleeve T-shirts, 100-pack||$350.00|
|Long-sleeve T-shirts, 100-pack||400.00|
|Direct labor, per hour||16.00|
|Ink, 32-ounce bottle||16.00|
|Plastic bags, 100-pack||8.00|
Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.
What is the standard price of producing one short-sleeve T-shirt?
The standard price of inventory refers to the sum of the standard manufacturing costs required to produce an item. These costs include items such as direct materials, direct labor, and manufacturing overhead. These standard costs are later compared to actual costs to identify positive or negative variances.
Answer and Explanation:
|Item||Total Cost||Formula||Per Unit Cost|
|Short-sleeve T-shirts, 100-pack||$350.00||$350 / 100||$3.50|
|Direct labor, per hour||16.00||$16 x (15 min / 60 min)||$4.00|
|Ink, 32-ounce bottle||16.00||$16 x (2 oz / 32 oz)||$1.00|
|Plastic bags, 100-pack||8.00||$8 / 100||$0.08|
|Overhead||9.40||$9.40 x (15 min / 60 min)||$2.35|
|Fringe benefits||20% x $4 direct labor cost||$0.80|
We find that the standard price of producing one short-sleeve T-shirt is equal to $11.73.
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from Accounting 301: Applied Managerial AccountingChapter 13 / Lesson 2