How to Calcualte standard cost of Material

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:

	(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