Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 38

Developing direct labor cost standards Brass Creations Co. makes decorative candle pedestals. An industrial engineer consultant developed ideal time standards for one unit of the Cambridge model pedestal. The standards follow, along with the cost accountant’s determination of current labor pay rates:

Worktype 1	0.20 hour @ $18.40 per hour
Worktype 2	0.30 hour @ $16.50 per hour
Worktype 3	0.42 hour @ $28.00 per hour

Required:

a. Using the preceding data, calculate the direct labor cost for a Cambridge model pedestal.

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b. Would it be appropriate to use the cost calculated in part a as a standard cost for evaluating direct labor performance and valuing inventory? Explain your answer.

Step 1 of 2

The following is the computation of direct labor cost for a Cambridge model pedestal:

Thus, the total direct labor cost per Cambridge model pedestal is .