Question: MDA Inc. processes corn into corn starch and corn syrup. The companys productivity and cost standards follow: From every bushel of corn processed, ten pounds

MDA Inc. processes corn into corn starch and corn syrup. The company’s productivity and cost standards follow: From every bushel of corn processed, ten pounds of starch and five pounds of syrup should be produced. Standard direct labor and variable overhead total $0.50 per bushel of corn processed. Standard fixed overhead (the predetermined fixed overhead application rate) is $0.40 per bushel processed.

Required:

a. Calculate the standard absorption cost per pound for the starch and syrup produced from the processing of 18,000 bushels of corn if the average cost per bushel is $3.78.

b. Comment about the usefulness of this standard cost for management planning and control purposes.

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