Direct Materials Standards

Direct Materials Standards of price is the price that should be paid for a single unit of materials, including allowances for quality, quantity purchased, shipping, receiving, and other such costs, net of any discounts allowed.Direct Materials Standards of price permit checking the performance of the purchasing department and the influence of various internal and external factors and measuring the effect of price increase or decrease on the company’s profits. Determining the price or cost to be used as the standard cost often difficult, because the prices used are controlled more by external factors than by company’s management.