1)Direct Material Cost Standard:The establihment of standard cost of material involves:
i) Determaine of standard quantity of materials.
ii) Determaine of standard price of materials.
Determination of standard quantity of materials: For determine of standard quantity of material following information per unit of output is obtained:
i) Material contents of product
ii)Standard composition of mix, and
iii) Quantity of wastage
Determination of standard price of materials:- On the basis of management policy, decision is taken weather price standard will be based on recent past average, current price of expected prices.
Discount, rebate available for different kinds of material are taken into consideration.
Related cost like freight, material handling, inspection etc.these cost form part of direct material.
Standard material cost of a product is determined by multiplying standard material quantity of a unit by a standard price per unit of material.
For Example:
i) Determaine of standard quantity of materials.
ii) Determaine of standard price of materials.
Determination of standard quantity of materials: For determine of standard quantity of material following information per unit of output is obtained:
i) Material contents of product
ii)Standard composition of mix, and
iii) Quantity of wastage
Determination of standard price of materials:- On the basis of management policy, decision is taken weather price standard will be based on recent past average, current price of expected prices.
Discount, rebate available for different kinds of material are taken into consideration.
Related cost like freight, material handling, inspection etc.these cost form part of direct material.
Standard material cost of a product is determined by multiplying standard material quantity of a unit by a standard price per unit of material.
For Example:
| (Amt in Rs.) | |
| Material price/unit | 100 |
| Discount : | 10% |
| Freight /unit | 2 |
| Qty require for 1 finished goods | 10 unit |
| Calculation for Standard material Cost | |
| Standard Price: | |
| Material Price/Unit | 100 |
| Less: Discount 10% of 100 | 10 |
| Add: Freight | 2 |
| Standard price of Material (A) | 92 |
| Standard qty require for 1 finished goods (B) | 10 |
| Standard Cost of material: (A*B) | 920 |
