One Reason Not to Depend Solely on Historical Records to Set

question 144

True/False

One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs.

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Definitions:

Variable Manufacturing Overhead

The portion of variable overhead that is directly associated with the manufacturing process, such as indirect materials or supplies.

Direct Material

Raw materials that are directly traceable and allocable to a finished product.

Material Purchase Price Variance

A reiteration, focusing on the deviation between the actual amount paid for material and the standard cost.

Standard Price

The predetermined cost assigned to materials, labor, and overhead for the purpose of budgeting and cost control.