Jay Bole is in the process of developing a standard for the labour cost of one unit of Product X.According to the design manual,it takes a skilled worker 30 minutes to produce one unit of Product X when the workshop is operating at peak condition.However,Product X is quite complex and even a skilled worker operating in high efficiency often needs another 5 minutes to adjust the tools,re-oil the machine and rework some aspects of the product.A skilled worker is paid $30 per hour,while the company pays 20% on-costs on top of this.Jay decides to develop a perfection standard.The standard labour cost for one unit of Product X is:
A) $15
B) $17.50
C) $18
D) $21

Question

Quizplus · Accepted Answer

The total time required to make one unit of Product X is 35 minutes (30+5). 
Since a skilled worker is paid $30 per hour, their cost for 35 minutes (0.58 hours) is:
$30 x 0.58 = $17.40
Adding 20% on-costs:
$17.40 x 1.2 = $20.88
Rounding up to the nearest dollar, the standard labour cost for one unit of Product X is $18. Therefore, the correct answer is C).

Jay Bole Is in the Process of Developing a Standard