The management accountant of a furniture manufacturer is developing a standard for the labour cost of one massage chair. When operating at peak efficiency, a skilled worker will take 16 hours to produce assemble one massage chair and 20 minutes to package one massage chair. However, due to the complexity of manufacturing the chair, even a skilled worker who is highly efficient often needs another 1.0 hr to adjust the tools, re-oil relevant machinery and rework some parts of the chair prior to packaging. A skilled worker is paid $40 per hour which excludes on-costs of 20 per cent.

Question 1

If the company adopts perfection standards, what is the standard labour cost for one massage chair?

Question 2

Assume that for every 61 massage chairs assembled, 35 massage chairs will be defective and will have to discarded. If the company adopts perfection standards, recalculate the standard labour cost for one massage chair. 

Answer rating: 100% (QA)

Question 1 To calculate the standard labor cost for one massage chair under perfection standards we ... View the full answer