Lopez company uses both standards and budgets. for the year, estimated production of product x is 500,000 units. total estimated cost for materials and labor are $1,400,000 and $1,700,000.

compute the estimates for (a) a standard cost and (b) a budgeted cost. (round standard costs to 2 decimal places, e. g. 1.25.)

materials labor
a) standard cost $ $
b) budgeted cost $ $

Standard cost is $2.8 for material and $3.4 for labour

Explanation:

Standard cost is the cost of producing 1 unit and is recorded in a standard cost card. That means the amount of the 3 elements of cost (material, labor and overhead) used in making a single unit will be in a standard cost card. It is computed by dividing the total cost by the number of units to be produced.

a) STANDARD COSTS

Cost TypeComputation                  Standard Costs

Material     $1,400,000 /500,000 units   $2.80

Labour    $1,700,000 /500,000 units   $3.40

OverheadNot provided  -  

TotalTotal cost for I unit of X        $6.20

b) BUDGETED COSTS represents the total costs

Standard CostsTotal Number of UnitsBudgeted Costs

$2.80                  500,000 units         $1,400,000

$3.40                  500,000 units         $1,700,000

TOTAL    

$6.20                500,000 units         $3,100,000