Question

Multiple Choice Question 71

Concord Corporation produces a product that requires 2.6 pounds of materials per unit. The allowance for waste and spoilage per unit is 0.3 pounds and 0.1 pounds, respectively. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $0.4 per pound, and receiving and handling costs are $0.08 per pound. The hourly wage rate is $12 per hour, but a raise which will average $0.3 will go into effect soon. Payroll taxes are $1.20 per hour, and fringe benefits average $2.40 per hour. Standard production time is 1 hour per unit, and the allowance for rest periods and setup is 0.2 hours and 0.1 hours, respectively.

The standard direct materials price per pound is

$2.48.

$2.00.

$2.44.

$1.96.

Answer 1

Standrad Qunatity per unit = 2.6 pounds+0.3 pounds+0.1 pounds
=3 pounds per unit
Standard cost for 3 pounds
Purchase cost (3*$2)	$       6.00
Add:
Frieght cost ($0.4*3)	$       1.20
Receiving and handeling cost ($0.08*3)	$       0.24
Less:
Trade discount (2%*$6)	$       0.12
Net cost	$       7.32
Standard direct material price per pound = $7.32/3 = $2.44
Correct Option : $2.44