Ea1lo 81moisha Is Developing Material Standards For Her Comp

Ea1lo 81moisha Is Developing Material Standards For Her Company The

Moisha is developing material standards for her company. The operations manager prefers grade A widgets because they are easier to work with and meet customer quality expectations. Grade B is unsuitable due to customer preferences and increased assembly time. Moisha contacts several suppliers for widget prices, all within $0.05 of each other. She considers the importance of this difference since they will use millions of widgets. The lowest-priced supplier has issues with late deliveries and low-quality materials. Therefore, she opts for a supplier charging $0.02 more per widget but guaranteeing on-time delivery and quality, at a cost of $0.48 per widget. Each unit requires four widgets. The goal is to calculate the standard cost per unit for widgets.

Paper For Above instruction

The standard cost per unit for widgets is determined by multiplying the cost per widget by the number of widgets required per unit. Given that the supplier charges $0.48 per widget and each product unit uses four widgets, the calculation is straightforward:

Standard cost per widget = $0.48

Number of widgets per unit = 4

Standard cost per unit = $0.48 × 4 = $1.92

Therefore, the standard cost per unit for widget production, considering the chosen supplier, is $1.92.

In establishing this standard, the company ensures accurate product costing, which is essential for pricing strategies, profitability analysis, and inventory valuation. Standard costing enables the company to monitor variances and take corrective actions promptly. Selecting a supplier that guarantees timely delivery and quality, even at a slightly higher price, aligns with strategic objectives such as maintaining product standards and customer satisfaction.

Furthermore, understanding the cost structure helps in evaluating potential cost-saving initiatives and negotiating better terms with suppliers in the future. It also facilitates budgeting and financial planning by providing predictable cost metrics. The choice of supplier reflects a calculated trade-off between purchase price and supplier reliability, emphasizing the importance of quality and timeliness over minor price differences in large-scale production settings.

References

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