Gross profit margins for the year improved to 20.9% of sales compared to last years 18.5%. All operations reported improved margins due in large part to improved operating efficiencies as a result of cost reduction measures implemented during the second and third quarters of the fiscal year and increased manufacturing throughout due to higher unit volume sales. Contributing to the improved margins was a favorable materials price variance due to competitive pricing by suppliers as a result of soft demand for petrochemical-based products. This favorable variance is temporary and will begin to reverse itself as stronger worldwide demand for commodity products improves in tandem with the economy. Partially offsetting these positive effects on profit margins were competitive pressures on sales prices of certain product lines. The company responded with pricing strategies designed to maintain and/or increase market share.

1) Is it apparent from the information whether Glassmaster utilizes standard costs? Why or why not?

2) Do you think the price variance experienced should or should not lead to changes in standard costs for the next fiscal year? Why or why not?