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.
Example:
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 |
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Standard quantity required for a
unit of product |
$3.00 |
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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.
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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 |
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