The following data relating to direct materials cost for August of the current year are taken from the records of Happy Tots Inc., a manufacturer of plastic toys: Quantity of direct materials used 4,200 lbs. Actual unit price of direct materials $5.50 per lb. Units of finished product manufactured 1,010 units Standard direct materials per unit of finished product 4 lbs. Direct materials quantity variance—unfavorable $912 Direct materials price variance—favorable $840 Determine the standard direct materials cost per unit of finished product, assuming that there was no work-in-process inventory at either the beginning or the end of the month. Round your answer to the nearest cent.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Standard Direct Materials Cost Per Unit from Variance Data
The following data relating to direct materials cost for August of the current year are taken from the records of Happy Tots Inc., a manufacturer of plastic toys:
| Quantity of direct materials used | 4,200 lbs. |
| Actual unit price of direct materials | $5.50 per lb. |
| Units of finished product manufactured | 1,010 units |
| Standard direct materials per unit of finished product | 4 lbs. |
| Direct materials quantity variance—unfavorable | $912 |
| Direct materials price variance—favorable | $840 |
Determine the standard direct materials cost per unit of finished product, assuming that there was no work-in-process inventory at either the beginning or the end of the month. Round your answer to the nearest cent.
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