prefabricated houses are the specialty of affordable homes inc of corsicana texas 544788

Computing and Using Standard Costs

P 1. Prefabricated houses are the specialty of Affordable Homes, Inc., of Corsicana, Texas. Although Affordable Homes produces many models, the company’s best-selling model is the Welcome Home, a three-bedroom, 1,400-square-foot house with an impressive front entrance. Last year, the standard costs for the six basic direct materials used in manufacturing the entrance were as follows:

wood framing materials, $2,140; deluxe front door, $480; door hardware, $260; exterior siding, $710; electrical materials, $580; and interior finishing materials, $1,520. Three types of direct labor are used to build the entrance: carpenter, 30 hours at $12 per hour; door specialist, 4 hours at $14 per hour; and electrician, 8 hours at $16 per hour. Last year, the company used an overhead rate of 40 percent of total direct materials cost.

This year, the cost of wood framing materials is expected to increase by 20 percent, and a deluxe front door will cost $496. The cost of the door hardware will increase by 10 percent, and the cost of electrical materials will increase by 20 percent. Exterior siding cost should decrease by $16 per unit. The cost of interior finishing materials is expected to remain the same. The carpenter’s wages will increase by $1 per hour, and the door specialist’s wages should remain the same. The electrician’s wages will increase by $0.50 per hour. Finally, the overhead rate will decrease to 25 percent of total direct materials cost.

Required

1. Compute the total standard cost of direct materials per entrance for last year.

2. Using your answer to requirement 1, compute the total standard unit cost per entrance for last year.

3. Compute the total standard unit cost per entrance for this year.