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Absorption cost

Standard absorption cost per unit.. A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad:

The piece of sheet metal from which six pad cases can be made costs $0.18.
This amount is based on the number of sheets in a 4,000 pound bundle of sheet metal, which is the usual purchase quantity.
The foam pad that is put in the case costs $0.05, based on the number of pads that can be cut from a large roll of foam.
Production standards, based on engineering analysis recognizing attainable performance, provide for the manufacture of 2,000 pads by two workers in an eight-hour shift. The standard direct labor pay rate is $14 per hour.
Manufacturing overhead is applied to units produced using a predetermined overhead application rate of $18 per direct labor hour of which $8 per hour is fixed manufacturing overhead.

Required:

a. Calculate the standard absorption cost of a package of 12 stamp pads.

b. Stamper Manufacturing Co.'s management is considering a special promotion that would result in increased sales of 1,000 packages of 12 pads per package. Calculate the cost per package that is relevant for this analysis.

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Solution Summary

This solution assists in calculating the standard absorption cost.

$2.19