Dahl Company,a clothing manufacturer,uses a standard costing system.Each unit of a finished product contains 2 metres of cloth.However,there is unavoidable waste of 20%,calculated on input quantities,when the cloth is cut for assembly.The cost of the cloth is $3 per metre.The standard direct material cost for cloth per unit of finished product is:

Question

Quizplus · Accepted Answer

To calculate the standard direct material cost, first determine the effective cloth needed per unit considering the waste. For 2 meters of cloth, with a 20% waste, the input required is 2 meters / (1 - 0.20) = 2.5 meters. At $3 per meter, the cost is 2.5 meters * $3 = $7.50. However, the correct calculation should consider the waste as part of the input, leading to 2 meters * $3 = $6.00, but since the waste is unavoidable, the cost is effectively $7.50.

Dahl Company,a Clothing Manufacturer,uses a Standard Costing System