STORY PROBLEM
Stellhorn expects to purchase potatoes for a acceptable grade and quality for $0.08 a pound. Stella has determined that it can produce 152 ounces of chips for every 10 pounds. Each bag of chips produced contains 19 ounces of chips. Other direct materials include bags and boxes, which amount to $0.14 per bag of chips. All other materials as oil and seasoning are treated as indirect costs. Stella opeates under a union contract and has three distinct classes, or categoris, of employees. The established classes and the agreed-upon hourly rates for direct laborers are as follows:
handlers $ 8.00 an hour
Machine operators 10.50 an hour
Inspectors 12.00 an hour
For the coming year, Stellahorn expects to produce six million bags of chips. The company has determined that it will require 10,800 hours of handler time, 12,000 hours of machine operator time, and 14,800 hours of inspection.
Variable overhead is applied on the basis of direct labor hours and historically has averaged 110% of labor dollars. The budget fixed overhead for the coming year is $1,350,000 and also is applied based on direct labor hours.
Question:
B. Using the following format, develop a standard cost sheet for material, labor, and overhead for each bag of potatoe chips.
I am not clear on how to create a standard cost, please help!!!
Thanks!
Linear Mode
