Staples - Johnstown 590 Galleria Dr, Johnstown PA 15904 Phone Number: (814) 262-9096
The distribution of manufacturing overhead costs to individual product unit, or production batches generally, requires a base or a cost driver, to which reference a rate, known as material burden rate applies. Material burden is the amount of manufacturing overhead costs that a unit of the base carries.
The business expected to make each final product for $200 in direct materials cost by using 10 units of materials at $20 per unit. But it actually spent an extra $5 to purchase every unit of materials and used 12 units for making each final product, resulting in a price differential of $60.Combining the $60 price variance and the $40 quantity variance leads to $100 in additional cost in direct materials.tep 1. Set up a standard costing system for direct materials. A business can initially assume or budget direct materials cost by implementing a standard costing system to estimate the expected purchase price and production usage of direct materials using the best information available.