Which of the following statements regarding the standard cost for direct materials is true?
A) It would be used on a static budget but not a flexible budget.
B) It would consist of two components - a standard quantity and a standard price.
C) It must be determined after materials are purchased for the year.
D) It can not be determined if a company uses a just-in-time inventory system.

Question

Quizplus · Accepted Answer

The standard cost for direct materials consists of two components - a standard quantity and a standard price. This standard cost is used in both static and flexible budgets and is determined before the start of the year. A company using a just-in-time inventory system can still determine a standard cost for direct materials based on expected usage and price.

Which of the Following Statements Regarding the Standard Cost for Direct