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 19,700 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 $9.15 per metric ton, shipped locally at a cost to Sharpe of $18.25 per metric ton.

Direct labor

Each case is expected to require 0.26 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 0.05 hours per case.

Sharpe pays its direct laborers an hourly wage of $17.40. Payroll taxes and benefits average

$3.65 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 $426,000 of overhead costs expected in 2022, and 2022's unit

sales are budgeted at 47,000 cases.

JANUARY 2022 RESULTS

In January, 2022, sales were $121,700 on 4,540 units sold.

94 metric tons of sand were purchased and used at a total cost, including shipping, of $2,600.

Actual direct labor costs were $31,200, and actual direct labor hours were 1,550.

Actual overhead costs were $37,500.