You work in the corporate controller's office for Sharpe Glassworks, Inc. Sharpe manufactures 12
ounce beer bottles for smaller breweries who lack the scale or vertical integration to make their
own. The bottles are sold to brewers by the case, at prices generally ranging between $25 and $28
per case, and there are 100 bottles to a case.
STANDARD COSTING
Direct materials
Sand makes up about 85% of the weight of the finished product, and is the only material
treated as a direct material. All other materials are treated as indirect, and thus part of
manufacturing overhead. There are 18,300 grams of sand in one finished goods unit (case),
but not all sand purchased makes it into the finished product. Waste and scrap in the normal
manufacturing process results in approximately 4% of the sand purchased being lost.
Sand is purchased by the metric ton (one million grams). The cost from Sharpe's main
supplier is $9.65 per metric ton, shipped locally at a cost to Sharpe of $17.55 per metric ton.
Direct labor
Each case is expected to require 0.42 direct labor hours to complete. This amount comes
from process analysis at Sharpe, and does not include setup and down time, which are
expected to average 0.15 hours per case.
Sharpe pays its direct laborers an hourly wage of $17.80. Payroll taxes and benefits average
$4.85 per direct labor hour.
Manufacturing overhead
Sharpe uses a traditional costing system and allocates overhead on the basis of standard
direct labor hours. There are $378,000 of overhead costs expected in 2022, and 2022's unit
sales are budgeted at 49,000 cases.
JANUARY 2022 RESULTS
In January, 2022, sales were $100,300 on 3,700 units sold.
74 metric tons of sand were purchased and used at a total cost, including shipping, of $1,500.
Actual direct labor costs were $45,300, and actual direct labor hours were 2,010.
Actual overhead costs were $30,800.