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.
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.
This solution assists in calculating the standard absorption cost.