ECONOMICS

Detailed explanation-1: -Setting direct materials standards. The standard price per unit for direct materials should reflect the final, delivered cost of the materials, net of any discounts taken. The standard price is for a particular grade of material, purchased in particular lot sizes, and delivered by a particular type of carrier.

Detailed explanation-2: -Standard price relates to a pre-established price for direct material while direct material quantity relates to the quantity of direct material purchased for production. One of the reasons for calculating a standard price is to use it as a benchmark for comparing actual price.

Detailed explanation-3: -Quantity and price standard: A quantity standard implies the number of materials that should be used to produce a single unit. Price standard is the price that should pay for materials at a given activity level.