Multiple Choice
Differential cost is best defined as:
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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A company uses a perpetual inventory system. The following information relates to the production of widgets in June:- Direct materials: \$4 per unit- Direct labor: \$3 per unit- Variable manufacturing overhead: \$2 per unit- Fixed manufacturing overhead: \$1 per unitWhat is the standard cost per widget?
A
\$7
B
\$8
C
\$10
D
\$9
Verified step by step guidance1
Step 1: Understand the concept of standard cost. Standard cost is the predetermined cost of manufacturing a single unit of product, including all direct and indirect costs associated with production.
Step 2: Identify the components of the standard cost from the problem. These include direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead.
Step 3: Add the costs for each component to calculate the standard cost per widget. Use the formula: Standard Cost = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead.
Step 4: Substitute the given values into the formula. Direct Materials = \$4, Direct Labor = \$3, Variable Manufacturing Overhead = \$2, Fixed Manufacturing Overhead = \$1.
Step 5: Perform the addition to find the total standard cost per widget. Ensure all components are included in the calculation to arrive at the correct total.
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