Custom Design Manufactures Baby Blankets by Turning a Client's Photograph

question 186

Essay

Custom Design manufactures baby blankets by turning a client's photograph of a new baby into a design printed on the blanket.This is a popular item, selling for $30, for new parents and grandparents.The following information has been provided by various units within Custom Design's departments.The company purchases fleece blankets in bundles of 100 at a price of $500 per bundle.Custom Design has to pay shipping charges of $10 per bundle.The process of transferring a picture onto a blanket costs $1.50.Each blanket is boxed in a cardboard box that costs $0.25 each.It takes one worker 15 minutes to prepare a blanket and transfer the picture onto the blanket and another worker 5 minutes to check the blanket for flaws in the printing and package the blanket.Workers are paid $15 per hour.Custom Design applies overhead at a rate of 120% of direct labor cost.
Required
Compute the standard cost of producing one blanket.

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Definitions:

Direct Labor Variances

The differences between the budgeted and actual costs of direct labor used in production.

Direct Labor

The labor cost directly associated with the production of goods or services, including wages for workers who physically produce a product.

Fixed Overhead Budget Variance

The difference between the fixed overhead costs that were budgeted and the actual fixed overhead costs incurred.

Fixed Manufacturing Overhead

Costs that remain constant regardless of the level of production or sales volume, such as salaries of supervisors and rent for factory premises.