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	8,400 lbs.
Actual unit price of direct materials	$4.5 per lb.
Units of finished product manufactured	2,020 units
Standard direct materials per unit of finished product	4 lbs.
Direct materials quantity variance—unfavorable	$1,504
Direct materials price variance—favorable	$1,680

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.

Product finished		units
Standard finished product for direct materials used		units
Deficiency of finished product for materials used		units
Standard cost for direct materials	$	per unit

Answer 1

Calculation of standard direct materials cost per unit is shown as follows:-

Total direct materials variance = Direct materials qty variance+Direct materials price variance

= $1,504 U + $1,680 F = $176 F

Actual materials cost = Quantity of direct materials used*Actual unit price of direct materials

= 8,400 lbs.*$4.5 per lb = $37,800

Std materials cost allowed = Actual materials cost+Direct materials variance

= $37,800+$176 F = $37,976

Standard materials cost per unit = Total standard materials cost allowed/Units of finished product manufactured

= $37,976/2,020 units = $18.80 per unit

Therefore standard direct materials cost per unit of finished product is $18.80 per unit.