The Following Standard Costs Were Developed for One of Commodore

question 58

Essay

The following standard costs were developed for one of Commodore Company's products: $\begin{array}{c}\text {STANDARD COST CARD}\\\text { PER UNIT}\\\begin{array}{llc}\text { Direct materials: } & 3 \text { pounds } \times £ 2 \text { per pound } & £ 6.00 \\\text { Direct labour: } & 2 \text { hours } \times £ 12 \text { per hour } & 24.00 \\\text { Variable overhead: } & £ 4 \text { per hour } & ? \\\text { Fixed overhead } & &\underline{ ?} \\\text { Total standard cost per unit } & & ?\end{array}\end{array}$ The following information is available regarding the company's operations for the period: $\begin{array}{ll}\text { Units produced } & 12,000 \\\text { Materials purchased } & 50,000 \text { pounds at } £ 2 \text { per pound } \\\text { Materials used } & 40,000 \text { pounds } \\\text { Direct labour } & 25,000 \text { hours at } £ 13 \text { per hour }\\\text { Overhead incurred: }\\\text { Variable } & £ 90,000 \\\text { Fixed } & £ 300,000\end{array}$ Budgeted fixed overhead for the period is £280,000, and expected capacity for the period is 28,000 direct labour hours.
a.Calculate the standard fixed overhead rate.
b.Complete the standard cost card for the product.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or business activity, remaining constant even when output changes.

Variable Cost

Expenses that change in proportion to the activity or volume of business.

Persons Served

A term often used in service delivery and nonprofit sectors to refer to the number of individuals who receive services or benefits from a program.

Cost Behavior

Refers to the way different types of production costs change when there is a change in the level of production.