Question

Standard Direct Materials Cost per Unit from Variance Data

The following data relating to direct materials cost for October of the current year are taken from the records of Good Clean Fun Inc., a manufacturer of organic toys:

Quantity of direct materials used	7,300 lbs.
Actual unit price of direct materials	$2.2 per lb.
Units of finished product manufactured	1,755 units
Standard direct materials per unit of finished product	4 lbs.
Direct materials quantity variance—unfavorable	$672
Direct materials price variance—favorable	$1,460

Determine the standard direct materials cost per unit of finished product, assuming that there was no inventory of work in process at either the beginning or the end of the month. If required, round your standard cost per unit answer to two decimal places.

Answer 1

Answer

• Standard direct material cost can be calculated using Price Variance.
• Direct material price variance (F) = (Standard rate – Actual rate) x Actual qty of material used
  $ 1460 F = (SR - $ 2.2) x 7300 lbs
  1460 = (SR – 2.2) x 7300
  1460 / 7300 = SR – 2.2
  0.2 = SR – 2.2
  0.2 + 2.2 = SR
  Standard rate per lb = $ 2.4 per lb
• Standard lbs required per unit = 4 lbs
• Answer:
  Standard direct material cost per unit = 4 lbs x $ 2.4
  = $ 9.60 Answer