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5.The purchasing manager will generally have responsibility for materials pricevariance because they have control over the price paid for goods. However,someone other than purchasing manager could be responsible for a materialsprice variance. Production supervisors are generally responsible for labor ratevariance because labor rate variances generally arise as a result of how labor isused. The production department generally has responsibility for materialsquantity variance because they see that material usage is kept in line withstandards. However, sometimes the purchasing department may be responsiblefor an unfavorable materials quantity variance.6.The materials price variance can be computed either at the time of purchase ofdirect materials or at the time when the direct materials are used. Mostcompanies compute the materials price variance when materials are purchasedrather than when they are used in production. There are two reasons for thispractice. First, delaying the computation of the price variance until the materialsare used would result in less timely variance reports. Second, computing theprice variance when the materials are purchased allows materials to be carried inthe inventory accounts at their standard cost, which greatly simplifiesbookkeeping.
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16. Which department should usually be held responsible for an unfavorable materials pricevariance?A.Production.B.Materials Handling.C.Engineering.D.Purchasing.The purchasing department should ordinarily be held responsible for an unfavorable materialsprice variance because that department ordinarily has most control over the price.
AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBloom's: KnowledgeLearning Objective: 10-01 Compute the direct materials quantity and price variances and explain their significanceLevel: Easy17. Tower Company planned to produce 3,000 units of its single product, Titactium, duringNovember. The standards for one unit of Titactium specify six pounds of materials at $0.30per pound. Actual production in November was 3,100 units of Titactium. There was anunfavorable materials price variance of $380 and a favorable materials quantity variance of$120. Based on these variances, one could conclude that:
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AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBloom's: ComprehensionLearning Objective: 10-01 Compute the direct materials quantity and price variances and explain their significanceLevel: MediumSource: CMA, adapted
Chapter 10 - Standard Costs and Variances18. If the labor efficiency variance is unfavorable, then
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10-71AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBloom's: ComprehensionLearning Objective: 10-02 Compute the direct labor efficiency and rate variances and explain their significanceLevel: Medium
AACSB: Reflective ThinkingAICPA BB: Critical ThinkingAICPA FN: MeasurementBloom's: KnowledgeLearning Objective: 10-02 Compute the direct labor efficiency and rate variances and explain their significanceLevel: Easy19. A labor efficiency variance resulting from the use of poor quality materials should becharged to:
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Chapter 10 - Standard Costs and Variances10-72
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Variance, Trigraph, Direct material price variance, AACSB