LoveMyLips specializes in manufacturing lipstick. Legally Pink, one of more than 75 shades produced by the company,
Question:
LoveMyLips specializes in manufacturing lipstick. Legally Pink, one of more than 75 shades produced by the company, is made form castor oil, beewax, aloe vera, and a base compound. For the next 12 months, the company's purchasing agent believes that the cost of the ingredients will be as follows:
Ingredient | Standard Cost |
Castor oil Beeswax Aloe Vera Base compound | $5.95 per gallon $5.40 per gallon $19.60 per gallon $24.00 per gallon |
The direct labor time standard is 3.5 hours per case at a standard direct labor rate of $11.00 per hour. The standard overhead rates are $15.00 per direct labor hour fo the standard variable overhead rate and $13.00 per direct labor hour for the standard fixed overhead rate.
a. Using these production standards, compute the standard unit cost of direct materials per case of Legally Pink if it takes 0.2 gallon of castor oil, 0.5 pound of beeswax, 0.25 gallon of aloe vera, and 1 gallon of base compound to produce one case.
b. Using the standard unit cost of the direct materials per case determine in (a) and the production standards given for direct labor and overhead, compute the standard unit cost of one case of Legally Pink.