For Better Control of Direct Material Prices, When Should Direct

question 63

Multiple Choice

For better control of direct material prices, when should direct material price variance be recognized?

• A)when material is purchased
• B)when material is issued from the storeroom
• C)when material is put into production
• D)when production is completed

---

Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a predetermined basis such as direct labor hours.

Direct Labour-Hours

The total hours of labor directly involved in the production of goods or services, often used as a basis for allocating overhead costs.

Direct Material Purchased

The raw materials acquired that are directly used in the manufacturing of a product.

Actual Overhead Cost

The real expenses incurred during production that are not directly tied to specific products, including electricity, rent, and managerial salaries.