Explain Why Companies Must Be Careful to "Not Overpromise and Underdeliver

question 38

Essay

Explain why companies must be careful to "not overpromise and underdeliver" on their products and services.

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Definitions:

Direct Materials Purchases Variance

This term refers to the difference between the actual cost of materials purchased and the expected (standard) cost of materials needed to manufacture the products during a specific period.

Materials Price Variance

The difference between the actual cost of materials and the expected (standard) cost.

Raw Material

The basic material from which a product is made, used in the initial stages of production.

Materials Price Variance

The difference between the actual cost of materials and the standard cost multiplied by the quantities purchased.