The direct materials price standard is a carefully derived estimate of what a particular type of direct material will cost when purchased during the next accounting period.

Question

Quizplus · Accepted Answer

The direct materials price standard is indeed a carefully derived estimate of what a particular type of direct material will cost when purchased during the next accounting period. This standard is used as a benchmark against which the actual cost of materials purchased can be compared and evaluated. Variance analysis is used to identify and explain any differences between the actual and standard costs of direct materials, which can help management take corrective actions and improve overall operational efficiency.

The Direct Materials Price Standard Is a Carefully Derived Estimate