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why is it important to consider the relationship among cost, quality, and selling prices when establishingstandards...

why is it important to consider the relationship among cost, quality, and selling prices when establishingstandards for direct materials?
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The establishment of standard cost for direct materials involves the standard price of direct materials determination and standard quantity of direct materials determination. In calculating the direct materials standard price it considers all the costs that are included single unit of direct materials. When establishing standards for direct materials it is vital to consider the relationship among cost, selling prices and quality because production cost is an important determinant for fixing the selling prices of the goods and services. When the quality of the product is high, then the production cost will be high, thus the company has to increase the standard selling price to cover it's cost.

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