Osgood company is a small manufacturer of wooden household items. Mr. john , the controller, Osgood. He has the information needed to develop standards for osgood%u2019s products.
One of the Osgood %u2018s product is wooden cutting board. Each cutting board requires 1.25 board feet of lumber and 12 minutes of direct labour time to prepare and cut the lumber. The cutting boards are inspected after they are cut. Because the cutting boards are made of a natural material that has imperfections. One board is normally rejected for each, five that are accepted ( the rejected boards are totally scrapped).
Four rubber foot pads are attached to each good cutting board. A total of 15 minutes of direct labour time is required to attach all four foot pads and finish each cutting board. The lumber for the cutting boards costs Rs. 3 per board foot and each foot pad costs Rs. 0.05. direct labour is paid at the rate of Rs. 18 per hour.
Questions to be discussed:
1. Develop the standard costs for the direct cost components of the cutting board.
2. Identify the advantages of implementing a standard costing system.