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	6,300 lbs.
Actual unit price of direct materials	$3.9 per lb.
Units of finished product manufactured	1,515 units
Standard direct materials per unit of finished product	4 lbs.
Direct materials quantity variance—unfavorable	$960
Direct materials price variance—favorable	$630

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

Standard Product Cost, Direct Materials Variance

Condiments Company uses standards to control its materials costs. Assume that a batch of ketchup (2,800 pounds) has the following standards:

	Standard Quantity		Standard Price
Whole tomatoes	4,700	lbs.	$ 0.40	per lb.
Vinegar	260	gal.	$ 2.40	per gal.
Corn syrup	22	gal.	$ 8.90	per gal.
Salt	104	lbs.	$ 2.20	per lb.

The actual materials in a batch may vary from the standard due to tomato characteristics. Assume that the actual quantities of materials for batch K-111 were as follows:

4,900 lbs. of tomatoes

250 gal. of vinegar

23 gal. of corn syrup

103 lbs. of salt

a. Determine the standard unit materials cost per pound for a standard batch. If required, round amounts to the nearest cent.

Ingredient	Standard Cost per Batch
Whole tomatoes	$
Vinegar	$
Corn syrup	$
Salt	$
Total	$
Standard unit materials cost per pound	$

b.  Determine the direct materials quantity variance for batch K-111. If required, round amounts to the nearest cent. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Ingredient	Materials Quantity Variance	Favorable/Unfavorable
Whole tomatoes	$	Unfavorable
Vinegar	$	Favorable
Corn syrup	$	Unfavorable
Salt	$	Favorable
Total direct materials quantity variance	$	Unfavorable

Answer 1

GOOD CLEAN FUN INC.

Product finished	1515	units
Standard finished product for direct material used (6,300 / 4)	1575	units
Deficiency of finished product for materials used (1,575 - 1,515)	60	units
Standard cost for direct materials ($ 4 lb x $4.00)	$16.00	per unit

Working:

Quantity of direct materialsused	6300	lbs
Actual unit price of direct materials	$3.90	per lb
Direct material quantity variance	960	Unfavourable
Formula for direct material quantity variance = (SQ - AQ) x SP
where SQ = Standard quantity for actual production
AQ = Actual Quantity used
SP = Standard price per unit of direct material
For the given question,
SQ = 4 lb x 1,515 = 6,060 lbs
Therefore   (6,060 - 6,300) X SP = -960   (negative because the variance is unfavourable)
-240 x SP = -960
SP = -960/-240 = $4.00 per lb

CONDIMENTS COMPANY

a.

Ingredient	Standard		Standard price	Standard cost per batch
	Quantity	unit
Whole Tomatos	4700	lbs.	$0.40	$1,880.00
Vinegar	260	gal.	$2.40	$624.00
Corn Syrup	22	gal.	$8.90	$195.80
Salt	104	lbs.	$2.20	$228.80
Standard unit material cost per batch				$2,928.60

b.

Ingredient	Quantity			Standard price	Quantity Variance
	Standard	Actual	Variance		Amount	F/U
Whole Tomatos	4700	4900	-200	$0.40	$80.00	Unfavourable
Vinegar	260	250	10	$2.40	$24.00	Favourable
Corn Syrup	22	23	-1	$8.90	$8.90	Unfavourable
Salt	104	103	1	$2.20	$2.20	Favourable
Total direct material quantity variance					$115.10	Unfavourable