Love-My-Lips Specializes in Manufacturing Lipstick

question 113

Essay

Love-My-Lips specializes in manufacturing lipstick. Legally Pink, one of more than 75 shades produced by the company, is made from castor oil, beeswax, aloe vera, and a base compound.
For the next 12 months, the company's purchasing agent believes that the cost of ingredients will be as follows:
The direct labor time standard is 4 hours per case at a standard direct labor rate of $10.00 per hour. The standard overhead rates are $16.00 per direct labor hour for the standard variable overhead rate and $12.00 per direct labor hour for the standard fixed overhead rate.
a. Using these production standards, compute the standard unit cost of direct materials per case of Legally Pink lipstick if it takes 0.4 gallon of castor oil, 1 pound of beeswax, 0.2 gallon of aloe vera, and 1 gallon of base compound to produce one case.
b. Using the standard unit cost of direct materials per case determined in (a) and the production standards given for direct labor and overhead, compute the standard unit cost of one case of Legally Pink lipstick.

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