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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

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 3,000 lb.
Actual unit price of direct materials $5.50 per lb.
Units of finished product manufactured 1,400 units
Standard direct materials per unit of finished product 2 lb.
Direct materials quantity variance—unfavorable $1,000
Direct materials price variance —unfavorable $1,500

 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 end of the month.

To determine

Standard cost:

In the accounting records, the term standard cost refers to the practice of replacement of an expected cost for an actual cost. Then the difference between the expected costs and actual costs showing the variance are also recorded periodically. A standard costs is also known as target cost or predetermined cost.

Direct material variances:

The difference between the actual material cost per unit, and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

    • Direct materials price variance.
    • Direct materials quantity variance.

To determine: The standard direct materials cost per unit of finished products.

Explanation

The standard direct materials cost per unit of finished products is ($5.00 × 2lb.) $10.

Working notes:

Determine the direct materials price variance as follows:

Direct materials price variance = [(Actual priceStandard price)× Actual quantity]$1,500(Unfavorable) =[($5.50Standard price)×3,000 lb

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