Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 44

Determining Standard Direct Materials Cost Agrichem manufactures Insect-Be-Gone. Each bag of the product contains 60 pounds of direct materials. Twenty-five percent of the materials evaporate during manufacturing. The budget allows the direct materials to be purchased at $2.50 a pound under terms of 2/10, n/30. The company’s stated policy is to take all available cash discounts. Determine the standard direct materials cost for one bag of Insect-Be-Gone.

Step 1 of 2

Standard Cost System and Direct Cost Variance:

A standard cost system is a tool for arranging financial plans, overseeing and controlling expenses, and assessing cost the board execution. A standard costing framework includes assessing the necessary expenses of a creation cycle.

Direct Cost Variance (DCV), is the distinction between the standard expense for real creation and the real expense underway. There are two sorts of work differences. Work Rate Variance is the distinction between the standard expense and the genuine cost paid for the real number of hours.