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To find the standard cost, you first compute the cost of direct materials, direct labor, and overhead per unit. Then you add up these amounts.

The figure applies this approach to Band Book Company. To calculate the standard cost of direct materials, multiply the direct materials standard price of $10.35 by the direct materials standard quantity of 28 pounds per unit.

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The result is a direct materials standard cost of $289.80 per case. To compute direct labor standard cost per unit, multiply the direct labor standard rate of $12 per unit by the direct labor standard hours per unit of 4 hours. The standard cost per unit is $48 for direct labor.

Now multiply the overhead allocation rate of $10 per hour by the direct labor standard hours of 4 hours per unit to come to a standard cost of overhead per unit of $40.

Add together direct materials, direct labor, and overhead to arrive at the standard cost per unit of $289.80 + $48 + $40 = $377.80. Making a single case of books costs Band Book $377.80.

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Kenneth W. Boyd has 30 years of experience in accounting and financial services. He is a four-time Dummies book author, a blogger, and a video host on accounting and finance topics.

Lita Epstein, who earned her MBA from Emory University's Goizueta Business School, enjoys helping people develop good financial, investing, and tax planning skills. She designs and teaches online courses and has written more than 20 books, including Bookkeeping For Dummies and Reading Financial Reports For Dummies, both published by Wiley.

Mark P. Holtzman, PhD, CPA, is Chair of the Department of Accounting and Taxation at Seton Hall University. He has taught accounting at the college level for 17 years and runs the Accountinator website at www.accountinator.com, which gives practical accounting advice to entrepreneurs.

Frimette Kass-Shraibman is Associate Professor of Accounting at Brooklyn College — CUNY.

Vijay S. Sampath is Managing Director in the Forensic and Litigation Consulting business segment of FTI Consulting, Inc.

John A. Tracy is Professor of Accounting at the University of Colorado in Boulder and the author of Accounting For Dummies.

Tage C. Tracy is principal owner of TMK & Associates, an accounting, financial,and strategic business planning consulting firm.

John A. Tracy is Professor of Accounting at the University of Colorado in Boulder and the author of Accounting For Dummies.

Jill Gilbert Welytok, JD, CPA, LLM, practices in the areas of corporate law, nonprofit law, and intellectual property. She is the founder of Absolute Technology Law Group, LLC (www.abtechlaw.com). She went to law school at DePaul University in Chicago, where she was on the Law Review, and picked up a Masters Degree in Computer Science from Marquette University in Wisconsin where she now lives. Ms. Welytok also has an LLM in Taxation from DePaul. She was formerly a tax consultant with the predecessor firm to Ernst & Young. She frequently speaks on nonprofit, corporate governance–taxation issues and will probably come to speak to your company or organization if you invite her. You may e-mail her with questions you have about Sarbanes-Oxley at [email protected].