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

Question

Business

Delaney Salazar

15 May, 01:28

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

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Answers (1)

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Mariana Raymond · Answer 1

The correct answer is letter "D": direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department.

Explanation:

Standard price is the estimated price direct materials could have at the moment of ordering a purchase. Standard quantity refers to the forecasted number of units necessary for the production process of the firm. The two of them are separated to allocate each one to the department in charge of their providing accurate measures: standard prices are set by the purchasing department while the standard quantity is estimated by the production department.

The efficiency of standard price and quantity relies on the purchasing and production departments separately.