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

Exercise 45

Determining Standard Direct Materials Cost Rusty Industries manufactures a sugar-substitute, SS-2, from a natural ingredient, natura. Each 10-pound package of SS-2 is manufactured using twelve pounds of natura. The company has determined the purchase price per pound of natura to be $5.00 with a purchase term of 3/15, n/45 and FOB, destination. Rusty has a policy of taking all discounts offered. Determine the standard direct materials cost for one package of SS-2.

Step 1 of 2

The standard purchase material cost is the cost company has to pay to the manufacturer after the purchase of material, after deducting discounts if applicable.