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Outdoor Holiday Inc. manufactures tents. The finance department needs to know the standard cost of one tent to perform variance analysis. The following information was
Outdoor Holiday Inc. manufactures tents. The finance department needs to know the standard cost of one tent to perform variance analysis. The following information was gathered with respect to direct materials, direct labour, variable overhead and fixed overhead. Required: Prepare a standard cost sheet for one finished tent. Show ALL Calculations. Materials: Standard Costs Tent material Cutting Department The tent material is purchased in 250 m rolls. Each roll costs $500 and each tent requires 10 m of material (delivery cost is included in the price as the company does not offer a discount for early payment). Tent sewing department Super strength thread comes in 1 km spools (1,000 meters). Each spool costs $30. The sewing department uses 200 m per tent. We get our thread from the same supplier so delivery is included in the total price. Tent pole Forming Department (4 poles per tent): Flexible Tent pole material is purchased in 25 meter lengths, at a cost of $50.00 per 25 meter length. There are terms of 2/10, n/30, (we always take the discount). Freight charges are $60.00 for a bundle of 40, 25-meter lengths. It takes four 2-meter pieces to make 1 tent frame. Weatherproofing Department: Weather guard compound costs $35.00 per 5 litre container. Direct Labour Standards Tent cutting Department: 10 tents per hour @ $24.00 per hour Sewing Department: 1/3 hr. per tent @ $35.00 per hour Tent pole forming @ $17.00 per hour 1/4 hr per pole Assembling Department: 12 minutes per tent @ $30.00 per hour Weatherproofing Department: 1 hr per rod @ $28.00 per hour Budgeted Overhead: $15.00 per direct labour $ 7.00 per direct labour Variable Overhead: Material Cutting Department hour Sewing Department hour Tent Pole Forming Department hour Assembling Department hour Weatherproofing Department hour $ 5.00 per direct labour $ 6.00 per direct labour $10.00 per direct labour $25.00 per direct labour $11.00 per direct labour Fixed Overhead: Material cutting Department hour Sewing Department hour Tent Pole Forming Department hour Assembling Department Weatherproofing Department hour $ 4.00 per direct labour $ 2.00 per direct labour hour $ 8.00 per direct labour Construction: After the assembling process, the tents are lifted onto a metal rod that has 5 rotating hooks. Each hook supports one tent. The tents are then sprayed evenly with the weatherproofing agent and flash dried. It requires 15 litres of weather guard to coat 5 tents. Solution: Total materials = $63.16 (includes tent material, thread, tent poles and weatherproofing) Total labour = $42.667 (includes cutting, sewing, pole forming, assembling and weatherproofing) Total VAR OH = $12.033 (includes cutting, sewing, pole forming, assembling and weatherproofing) Total Fixed OH = $12.167 (includes cutting, sewing, pole forming, assembling and weatherproofing) Total std cost for 1 finished tent = $130.03 (rounded to the nearest cent)
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