Reference no: EM132510646

The management accountant of a furniture manufacturer is developing a standard for the labour cost of one massage chair. When operating at peak efficiency, a skilled worker will take 20 hours to produce assemble one massage chair and 20 minutes to package one massage chair. However, due to the complexity of manufacturing the chair, even a skilled worker who is highly efficient often needs another 2.5 hr to adjust the tools, re-oil relevant machinery and rework some parts of the chair prior to packaging. A skilled worker is paid $40 per hour which excludes on-costs of 20 per cent.

Problem 1: If the company adopts practical standards, what is the standard labour cost for one massage chair? Round to 2 dec places if required.

Problem 2: Assume that for every 69 massage chairs assembled, 25 massage chairs will be defective and will have to discarded. If the company adopts practical standards, recalculate the standard labour cost for one massage chair. Round to 2 dec places if required.