The standard price and quantity of direct materials are separated because
A) GAAP and IFRS reporting requires separation
B) direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department
C) standard prices are more difficult to estimate than standard quantities
D) standard quantities change more frequently than standard prices

Question

Quizplus · Accepted Answer

Direct materials prices are typically controlled and negotiated by the purchasing department, while the quantity used is largely determined by the production department's decisions regarding production levels and waste. Therefore, it is important to separate the standard price from the standard quantity in order to properly assign responsibility for cost variances and to evaluate performance of each department. The other options are not as relevant or accurate.

The Standard Price and Quantity of Direct Materials Are Separated