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# Absorption cost

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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.

#### Solution Summary

This solution assists in calculating the standard absorption cost.

\$2.19
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## Accounting Questions

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Question 2

Jay Manufacturing's sales slumped badly in 2006 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: Net sales, \$2,000,000; total costs and expenses, \$2,500,000; and net loss of \$500,000. Costs and expenses consisted of the following:

Total Variable Fixed
Cost of goods sold \$2,000,000 \$1,300,000 \$700,000
Selling expenses 200,000 50,000 150,000
\$2,500,000 \$1,500,000 \$1,000,000

Management is considering the following alternative for 2007:
Purchase new automated equipment that will change the proportion between variable and fixed costs to 40% variable and 60% fixed.

Instructions
A. Determine the selling price per unit.
B. Compute the break-even point in dollars for 2006.
C. Compute the break-even point in dollars under the alternative course of action for 2007.

Question 3

Fresh Air Products manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below:

Manufacturing Costs
Variable overhead \$ 3 per unit
Direct labor \$ 12 per unit
Direct material \$ 30 per unit

Beginning inventory 0 units
Units produced 12,000
Units sold 10,000