CAF-5 · Chapter 10 · Question 9 of 10
When setting a standard cost for direct materials, which of the following factors should the purchasing department normally incorporate into the standard price?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) The most competitive expected price at the required quality, incorporating expected bulk purchase discounts.
Explanation
Standard price information is derived assuming the procurement department has made a reasonable search for suppliers. The standard price should reflect the most competitive price at the required quality, taking into account expected purchase volumes and available trade/bulk discounts.
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