FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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the material cost variance of a company indicates a large favorable material price variance and a significant unfavorable material quantity variance. what might cause these offsetting variances?
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- Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials quantity variance is: Direct materials standard (7 Kilogram @ $2/Kilogram) Actual cost of materials purchased Actual direct materials purchased and used Multiple Choice $22.500 unfavorable $27.500 unfavorable $22,500 favorable $50,000 favorable $ 14 per finished unit $ 322,500 150,000 Kilogramarrow_forward1-What makes a variance favorable? Give an example of a favorable variance involving materials. What makes a variance unfavorable? Give an example of an unfavorable variance involving labor. 2-How do you balance a firm’s need to succeed and the need for not asking the workers for perfection? 3-What two components are needed to determine a standard for materials? 4-What makes a variance favorable? Give an example of a favorable variance involving materials. What makes a variance unfavorable? Give an example of an unfavorable variance involving labor.arrow_forwardThe principle of exceptions allows managers to focus on correcting variances between O a. competitor's costs and standard costs b. standard costs and actual costs O c. competitor's costs and actual costs d. variable costs and actual costsarrow_forward
- When is the direcet labor time variance unfavorable? A. when the actual quantity used is greater than the standard quantity B. when the actual quantity used is less than the standard quantity C. when the actual price paid is greater than the standard price D. when the actual price paid is less than the standard pricearrow_forwardWhat effect, if any, would you expect poor-quality materials to hare on direct labor variances?arrow_forwardWhich of the following is a possible cause of an unfavorable material quantity variance? A) paying more than should have for workers B) purchasing too much material C) hiring higher-quality workers D) purchasing substandard materialarrow_forward
- Please do not give solution in image format thankuarrow_forwardIf a purchasing manager is able to buy direct materials required in the manufacturing of a product at a lower than ‘standard’ cost why may this result in an overall unfavorable total variance for DM’s.arrow_forwarda. Direct materials price variance Unfavorable b. Direct materials quantity variance Favorable c. Direct materials cost variance Unfavorablearrow_forward
- The standard price for direct materials is used in the calculation of which variances ? Neither the price variance nor the quantity variance The quantity variance but not the price variance Both the price variance and the quantity variance The price variance but not the quantity variancearrow_forwardfarrow_forwardWhat is a materials price variance? Describe this in your own words. Writing a formula is not a sufficient answer. Provide a real world example that would result in an unfavorable materials price variancearrow_forward
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