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:

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 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