White, Inc. produces a chemical product whose primary component is purchased on credit and any discounts are always taken. The following material and labour elements make up the costs of the product: Purchase price for material $30 per litre
Freight and handling $130 per 100 litres
Each container of the chemical product contains 5.7 quarts of material. During the process 5% of the material is lost due to waste. Each container of product also requires 1.2 hours of labour. Each day 2 hours are taken for set-up, cleaning, and breaks. Also, the wage rate is $15 per hour and fringes/payroll taxes are 20% of wages. Clients can take a 3% discount if they pay invoices within 10 days; otherwise, the entire invoice amount is due within 30 days. 1 litre equals 4 quarts.
The standard hours per finished unit is:
A)1)2 hours
B)1)5 hours
C)1)6 hours
D)1)45 hours

Question

Quizplus · Accepted Answer

To calculate the standard hours per finished unit, we need to add the labour hours required for one container of product with the set-up, cleaning, and break hours, and then divide by the expected number of containers produced in one hour (taking into account the waste percentage).

Labour hours per container = 1.2 hours
Set-up/cleaning/break hours per hour = 2 hours
Total hours per hour = 1.2 + 2 = 3.2 hours
Expected number of containers produced per hour (after waste) = 100/((5.7*0.95)/4) = 20.02 containers per hour

Therefore, the standard hours per finished unit is: 
(1.2 + 2) / 20.02 = 0.16 + 0.1 = 1.6 hours (to the nearest tenth)

So, the best choice is C) 1.6 hours.