The Standard Price and Quantity of Direct Materials Are Separated

question 14

Multiple Choice

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

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Definitions:

Costs

An economic metric that considers the total expenditure of resources, including money, time, and labor, to achieve a particular goal or produce a good or service.

Allocation Method

A strategy or system used for distributing resources or costs among various projects, departments, or segments.

Hard Rationing

Hard Rationing occurs when external financial constraints prevent a company from obtaining the capital it needs to expand or continue operations, regardless of profitability.