Lakeway Manufacturing Co. manufactures and sells household cleaning products. The company’s research department has developed a new cleaner for which a standard cost must be determined. The new cleaner is made by mixing 15 quarts of trip hate solution and six pounds of so base granules and boiling the mixture for several minutes. After the solution has cooled, three ounces of methage are added. This “recipe” produces 12 quarts of the cleaner, which is then packaged in one-quart plastic dispenser bottles. Raw material costs are as follows:

Required:
a. Using the preceding data, calculate the raw material cost for one bottle of the new cleaner.
b. Assume that the preceding costs are the current best estimates of the costs at which required quantities of the raw material can be purchased. Would you recommend that any other factors be considered in establishing the raw material cost standard for the new cleaner?
c. Explain the process that would be used to develop the direct labor cost standard for the new product.

Transcribed Image Text:

Triphate solution ... Sobase granules. Methage. Bottle $0.40 per quart 0.86 per pound 1.30 per ounce 0.18 each