Problem: DMA, Inc. processes corn into starch and corn syrup. The company's productivity and cost standards follow:
From every bushel of corn processed, 14 pounds of starch and 4 pounds of syrup should be produced.
Standard direct labor and variable overhead total $0.51 per bushel of corn processed.
Standard fixed overhead (the predetermined fixed overhead application rate) is $0.48 per bushel processed.
Q1. Calculate the standard absorption cost per poun for the starch and syrup produced from the processing of 16,000 bushels of corn if the average cost per bushel is $2.36.
Q2. Comment about the usefulness of this standard cost for management planning and control purposes.