Kandy Harts manufactures custom T-shirts.Each T-shirt can be imprinted front and back with photos, company logos or other information.Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging.The following information is available regarding costs: Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.What is the standard price and standard quantity for direct labor?
A)$16.00; 0.25 hour
B)$19.20; 0.25 hour
C)$4.80; 1 hour
D)$4.80; 0.25 hour

Question

Kandy Harts manufactures custom T-shirts.Each T-shirt can be imprinted front and back with photos, company logos or other information.Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging.The following information is available regarding costs:  Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.What is the standard price and standard quantity for direct labor?
A)$16.00; 0.25 hour 
B)$19.20; 0.25 hour 
C)$4.80; 1 hour 
D)$4.80; 0.25 hour

Quizplus · Accepted Answer

To calculate the standard price and standard quantity for direct labor, we need to first find the cost for direct labor per unit. 
Direct labor cost per unit = Direct labor wage + Fringe benefits 
Direct labor wage = $12.00 per hour 
Fringe benefits = 20% of Direct labor wage = 0.20 x $12.00 = $2.40 per hour

Direct labor cost per unit = $12.00 + $2.40 = $14.40

Now, we need to divide the direct labor cost by the standard direct labor rate (which is the rate at which overhead is applied to direct labor).

Standard direct labor rate = Direct labor wage + Fringe benefits + Overhead rate 
Overhead rate = $9.40 per direct labor hour 
Direct labor wage + Fringe benefits = $14.40

Standard direct labor rate = $14.40 + $9.40 = $23.80 per hour

Finally, we need to divide the direct labor time per unit by the standard direct labor rate to get the standard quantity for direct labor.

Direct labor time per unit = 15 minutes = 0.25 hour

Standard quantity for direct labor = Direct labor time per unit ÷ Standard direct labor rate 
Standard quantity for direct labor = 0.25 hour ÷ $23.80 per hour 
Standard quantity for direct labor = 0.0105

Therefore, the standard price for direct labor is $23.80 per hour and the standard quantity for direct labor is 0.25 hour. The best choice is B.

Kandy Harts Manufactures Custom T-Shirts