Would it be considered as a price standard the standard price per unit for direct materials should reflect the final delivered cost of the materials net of applicable discounts?

Q: How are standard costs developed for direct materials?

To determine these costs, youll need to multiply the rate of each by the quantity (in units or hours). For example, if the direct materials price is $10 and the standard quantity is 20 pounds per unit, you would multiply $10 by 20 to get $200. This would be the standard cost for the direct materials only.

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Relevant Articles:
What is standard cost of direct materials?
What are the factors that should be included in setting the price and quantity standards for direct materials direct labor and manufacturing overhead?
What is a quantity standard What is a price standard?
How are standard costs developed for direct materials?

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Usually two standards are set for direct materials costs. These are:

A materials price standard.
A materials quantity (or usage) standard.

Materials price standard is discussed here. Materials quantity standard is discussed on materials quantity standard page.

Direct materials price standards permit:

Checking the performance of the purchasing department and the influence of various internal and external factors.
Measuring the effect of price increase or decrease on the company's profits.

Determining the price or cost to be used as the standard cost is often difficult, because the price used are controlled more by external factors than by a company's management. Prices selected should reflect current market prices and are generally used throughout the forthcoming fiscal period. The standard price for direct materials should reflect the final, delivered cost of the materials, net of any discounts taken.

Example:

Following is an example of the calculation of standard price per unit for direct materials:

Purchase price, top-grade pewter ingots, in 40-pound ingots	$3.60
Freight, by truck, from the supplier's warehouse	0.44
Receiving and handling	0.05
Less purchase discount	(0.09)

Standard price per pound	$4.00

In above example the standard price reflects a particular grade of materials (top grade), purchased particular lot size (40-pond ingots), and delivered by a particular type of carrier (truck). Allowances have also been made for handling and discounts. If every thing proceeds according to these expectations, the net cost of a pound of pewter should therefore be $4.00.

Relevant Articles:

�	Definition and Explanation of Standard Cost
�	Purposes and Advantages of Standard Costing System
�	Setting Standards
�	Materials Price Standard
�	Materials Price Variance
�	Materials Quantity Standard
�	Materials Quantity Variance
�	Direct Labor Rate Standard
�	Direct Labor Rate Variance
�	Direct Labor Efficiency Standard
�	Direct Labor Efficiency Variance
�	Factory Overhead Cost Standards
�	Overall or Net Factory Overhead Variance
�	Overhead Controllable Variance
�	Overhead Volume Variance
�	Overhead Spending Variance
�	Overhead Idle Capacity Variance
�	Overhead Efficiency Variance
�	Variable Overhead Efficiency Variance
�	Fixed Overhead Efficiency Variance
�	Mix and Yield Variance
�	Variance Analysis Example
�	Standard Costing and Variance Analysis Formulas
�	Management by Exception and Variance Analysis
�	International Uses of Standard Costing System
�	Advantages, Disadvantages, and Limitations of Standard Costing

What is standard cost of direct materials?

Direct Materials Standard Quantity and Standard Price represents the materials required to complete one good unit of product (i.e., a product with no defects), and it includes an allowance for waste and spoilage.

What are the factors that should be included in setting the price and quantity standards for direct materials direct labor and manufacturing overhead?

Direct labor rate variance. Direct labor efficiency variance. Variable manufacturing overhead standards and variances. Variable overhead spending variance.

What is a quantity standard What is a price standard?

Quantity and price standard: A quantity standard implies the number of materials that should be used to produce a single unit. Price standard is the price that should pay for materials at a given activity level.

How are standard costs developed for direct materials?

To determine these costs, you'll need to multiply the rate of each by the quantity (in units or hours). For example, if the direct materials price is $10 and the standard quantity is 20 pounds per unit, you would multiply $10 by 20 to get $200. This would be the standard cost for the direct materials only.