A cost analyst for Stamper Manufacturing Co. has assembled the following data about the Model 24 stamp pad:
The piece of sheet metal from which five pad cases can be made costs $0.24. This amount is based on the number of sheets in a 4,200-pound bundle of sheet metal, which is the usual purchase quantity. The foam pad that is put in the case costs $0.06, based on the number of pads that can be cut from a large roll of foam.
Production standards, based on engineering analysis recognizing attainable performance, provide for the manufacture of 1,000 pads by two workers in an eight-hour shift. The standard direct labor pay rate is $15 per hour.
Manufacturing overhead is applied to units produced using a predetermined overhead application rate of $16 per direct labor hour, of which $6 per hour is fixed manufacturing overhead.
a. Calculate the standard absorption cost of a package of 10 stamp pads.
b. Stamper Manufacturing Co.’s management is considering a special promotion that would result in increased sales of 500 packages of 10 pads per package. Calculate the cost per package that is relevant for this analysis.