Final answer:
Kilo Company's standard price (SP) per pound of direct materials is calculated as $12.50. This is determined by dividing the standard direct materials cost allowed for the units manufactured, which is $337,500, by the standard quantity, which is 27,000 pounds.
Step-by-step explanation:
To calculate Kilo Company's standard price (SP) per pound of direct materials, we can use the given standard direct materials cost allowed for the units manufactured and the unfavorable direct materials usage variance. We know that the standard direct materials cost for the units manufactured is $337,500, and the firm has an unfavorable usage variance of $6,500. This variance means that the actual cost of materials used was higher than the standard cost by $6,500, which is the difference between the standard cost and the actual cost used ($337,500 + $6,500 = $344,000). The actual quantity of materials used can be determined by adding this variance to the standard quantity for the actual output.
To find the standard quantity, we know that 2 pounds of direct materials are allowed for one finished unit and there were 13,500 finished units produced. So, the standard quantity is 2 pounds/unit × 13,500 units = 27,000 pounds. Since the actual cost is higher by $6,500, it means more materials were used than the standard quantity. Therefore, the actual quantity used is the standard quantity plus the extra quantity represented by the variance.
Since we are given that any price variance is recorded at the time of purchase, and the actual cost of the materials is stated as $350,000 for 55,000 pounds, we can calculate the standard price (SP) per pound as follows:
SP = Standard Costs Allowed / Standard Quantity
SP = $337,500 / 27,000 pounds
SP = $12.50 per pound