Quantity of direct materials used 3,000 lbs.
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 lbs.
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 the end of the month.
Answer:
Product finished………………………………………………………… 1,400 units
Standard finished product for direct materials used
(3,000 lbs. ÷ 2 lbs.)…………………………………………………… 1,500
Deficiency of finished product for materials used…………… (100) units
Standard cost for direct materials:
Quantity variance divided by deficiency of product
for materials used ($1,000 ÷ 100 units)……………………… $10.00 per unit
Alternate solution:
Price variance, unfavorable……………………………………… $1,500
Materials used……………………………………………………… ÷ 3,000 lbs.
Price variance per lb., unfavorable……………………………… $ 0.50
Unit price of direct materials…………………………………… $ 5.50
Less price variance (unfavorable) per lb. (from above)……… (0.50)
Standard price per lb.……………………………………………… $ 5.00
× Pounds per unit of product…………………………………… 2
Standard direct materials cost per unit of product………… $10.00
Proof:
Direct Materials Price Variance = (Actual Price – Standard Price) × Actual Quantity
= ($5.50 – $5.00) × 3,000
= $1,500 Unfavorable
Direct Materials Quantity Variance = (Actual Quantity – Standard Quantity)
× Standard Price
= (3,000 lbs. – 2,800 lbs.) × $5.00
= $1,000 Unfavorable