ECONOMICS

Detailed explanation-1: -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.

Detailed explanation-2: -Standard cost = direct labour + materials cost + manufacturing overhead. Here is how to calculate each of these elements in the formula: Direct labour = employee hourly rate x no. of hours worked x total number of units. Materials cost = market price per unit x total number of units.

Detailed explanation-3: -The cost of raw materials purchased can therefore be calculated as follows: Raw Materials Purchased = (Ending Inventory – Beginning Inventory) + Cost of Goods Sold. A direct material purchases budget determines the quantity of material purchased within a production period.

Detailed explanation-4: -Unit product cost is the total cost of a production run, divided by the number of units produced. It is useful to delve into the concept in more detail, to understand how costs are accumulated. A business commonly manufactures similar products in batches that may include hundreds or thousands of units per batch.