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Materials Quantity Standard:

Materials quantity standard is also called materials usage standard. This standard is normally developed from materials specifications prepared by the departments of engineering (mechanical, electrical, or chemical) or product design. In a small or medium-sized company, the superintendent or even the foremen will state basic specifications regarding type, quantity, and quality of materials needed and operations to be performed.

Quantity standards should be set after the most economical size, shape, and quality of the product and the results expected from the use of various kinds and grades of materials have been analyzed. The standard quantity should be increased to include allowances for acceptable levels of waste, spoilage, shrinkage, seepage, evaporation, and leakage etc. The determination of the percentage of spoilage or waste should be based on figures that prevail after the experimental and developmental stages of the product have been passed.


Following is an example of the calculation of standard quantity required to manufacture a unit of finished goods:

Material requirements as specified in the bill of materials $2.7
Allowance for waste and spoilage, in pounds 0.2
Allowance for rejects, in pounds 0.1
Standard quantity required for a unit of product $3.00

A bill of materials is a list that shows the quantity of each type of materials in a unit of finished product. It is a handy source of determining the basic material input per unit, but it should be adjusted for waste and other factors, as shown above, when determining the standard quantity per unit of product. "Waste and spoilage" in the table above refers to materials that are wasted as normal part of the production process or that spoil before they are used. "Rejects" refers to the direct material contained in units that are defective and must be scrapped.


Real Business Example:

Standards have been used for centuries in commercial enterprises. For example, Spanish Royal Tobacco Factory in Seville used standards to control costs in the 1700s. The Royal Tobacco Factory had a monopoly over snuff and cigar production in Spain and was the largest industrial building in Europe. Employee theft of tobacco was a particular problem, due to its high value. Careful records were maintained of the amount of tobacco leaf issued to each worker, the number of cigars expected to be made based on standards, and the actual production. The worker was not paid if the actual production was less than expected to minimize theft, tobacco was weighed after each production step to determine the amount of wastage.

Source: Salvador Carmona, Mahmoud Ezzamel, and Fernando Gutierrez, "Control and Cost Accounting Practices in the Spanish Royal Tobacco Factory," Accounting, Organizations and Society 22, no. 5, 1997, pp 411 - 446

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 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





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