Question

The standard price and quantity of direct materials are separated because a.standard prices are more difficult to estimate than standard quantities b.standard quantities change more frequently than standard prices c.GAAP and IFRS reporting requires separation d.direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department

Answer 1

Answer:

D) Direct materials prices are controlled by the purchasing department, and quantity used is controlled by the production department.

Explanation:

STANDARD PRICE relates to a pre-established price for direct material while DIRECT MATERIAL QUANTITY relates to the quantity of direct material that has been purchased for production. One of the reasons for calculating a standard price is to use it as a benchmark to compare actual price.

The separation of standard price and quantity of direct materials is to assist an organization to determine responsibility for variances so that the future improvement efforts can be targeted at a specific area. Standard prices of direct material are controlled by the purchasing department and price variances will therefore reflect the efficiency of the purchasing department. Direct material quantity is controlled by the production department and quantity variances will therefore reflect the efficiency of the production department.