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 manufacturing overhead?
A)$11.28; 0.25 hour
B)$9.40; 0.25 hour
C)$2.35; 1 hour
D)$2.82; 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 manufacturing overhead?
A)$11.28; 0.25 hour 
B)$9.40; 0.25 hour 
C)$2.35; 1 hour 
D)$2.82; 0.25 hour

Quizplus · Accepted Answer

To calculate the standard price for manufacturing overhead, we need to calculate the standard overhead rate.

Standard overhead rate = Budgeted overhead cost / Budgeted direct labor hours

Budgeted direct labor hours = 15 minutes = 0.25 hours per T-shirt

Budgeted overhead cost includes overhead applied at $9.40 per direct labor hour and fringe benefits at an additional 20% of wages. Let's assume the direct labor wage rate is $12.

Budgeted overhead cost = ($9.40 overhead rate per hour + $2.40 fringe benefits per hour) x 0.25 hours per T-shirt 
Budgeted overhead cost = $2.35 per T-shirt

Standard overhead rate = $2.35 / 0.25 = $9.40 per direct labor hour

Therefore, the standard price for manufacturing overhead is $9.40 per hour.

Kandy Harts Manufactures Custom T-Shirts