Answered: the material cost variance of a company…

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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The Purchasing Agent in a firm would be most likely to be held responsible for which of the…

A: Variances analysis involves determining of deviations if any by comparing the actual results with…

Q: Describe three reasons for an unfavorable direct manufacturing labor efficiency variance.

A: Direct Labor Efficiency Variance: Direct labor efficiency variance is the variation in the actual…

Q: Sales volume variances are attributable to differences between planned and actual activity volumes,…

A: Sales volume variances are a component of variance analysis used in cost and performance accounting.…

Q: What distinction must be made when computing the materials price variance vs. the materials quantity…

A: The answer for the theory question on material price and quantity variances is discussed hereunder :…

Q: What are the other external factors that affects the variance of a company's gross profit?

A: The difference between sales and the cost of goods sold results in the gross profit. This figure…

Q: The material price variance is computed by multiplying the difference between the actual price and…

A: GIVEN Material Price Variance is the difference between the actual cost of Material purchased and…

Q: Which statement may not always hold true? A. Increase in the units sold always lead to unfavorable…

A: In the given question, Option B - "Increase in Sale Price will always lead to favorable sales…

Q: Using more highly skilled direct laborers might affect which of the following variances a. variable…

A: The difference between the actual time taken to create a product and the time allocated for it is…

Q: Examine the main reasons why manufacturing companies are more sensitive to material price variances,…

A: (a) The main reasons why manufacturing companies are more sensitive to material price variances, as…

Q: When using a standard cost system what term is used to denote that the actual cost is less than the…

A: Standard cost is calculated using estimated amounts. If the actual cost is less than the standard…

Q: Beyond meaning good or bad for business, can you please explain the mechanics of favorable and…

A: The discrepancy between budgeted and actual figures is referred to as variance in accounting.…

Q: Question b Which of the following is a possible cause of an unfavourable materials quantity…

A: Use of inferior raw materials.Explanation:The materials quantity variance measures the difference…

Q: How can the concept of a composite unit be used to explain why an unfavorable total sales-mix…

A: Sales mix variance: The difference between a budgeted and actual sales mix. Sales mix is a…

Q: Kranberry Networks Ltd had implemented a standard costing system to aid it in assessing the…

A: Material Price Variance = ( Standard Price - Actual Price) * Actual Quantity Material Quantity =…

Q: How does persistent favorable variances in an employees cost performance create a management…

A: Favorable Variance: When the actual costs are lower than the standard, (or when the actual revenue…

Q: The materials price variance should be computed when materials are purchased. Group of answer…

A: Variance: The difference between the actual cost or price and the budgeted (standard) cost or price…

Q: An unfavorable materials quantity variance indicates that: Multiple Choice standard material price…

A: Unfavorable materials quantity variance means materials has been used more than what was estimated.…

Q: Hiring of less qualified workers B.An excess of material usage C.Material price increase D.Utilities…

A: Concept introduction: Direct labor Rate variance: this variance shows the difference of standard…

Q: hat ty

A: Variance analysis is a summary statement which demonstrate the difference between planned…

Q: How are overhead variances useful in nonmanufacturing settings? Can you think of an example?

A: All overhead variances, even those incurred outside the manufacturing function, are undoubtedly…

Q: If the material price variance is favorable but the material quantity variance is unfavorable, what…

A: Variance analysis is method of analysis of actual data and budgeted data. This helps an organisation…

Q: A price variance measures: Group of answer choices How good a company is in keeping its unit costs…

A: The objective of the question is to understand what a price variance measures in the context of…

Q: An unfavorable direct materials efficiency variance indicates that: a) actual usage of material…

A: Unfavorable materials quantity variance means materials has been used more than what was estimated.…

Q: Which of the following underlying assumptions form(s) the basis for gross profit variance analysis?…

A: Gross profit variance analysis is defined as the one which analyse the profit variance that comprise…

Q: he following sentences relate to achieving the financial goal of cost minimization. Which of the…

A: Cost minimization is a concept by which producers try to figure out how costs should be reduced.…

Q: When the total direct labor cost variance is unfavorable, the direct labor rate variance will (must)…

A: Honor Code: Since you have asked multiple questions, we will solve the first question for you. If…

Q: Most companies compute the materials price variance when materials are purchased. Group of choices…

A: SOlution: True. This is because Most companies compute the materials price variance when materials…

Q: Cite a specific example of the application of gross profit variance analysis. How will it help the…

A: Variance analysis for any variable enables the entity to break down the variable and establish…

Q: A favorable direct materials price variance and an unfavorable direct materials quantity variance…

A: Direct Material Price Variance = Actual Quantity Purchased x (Standard Price - Actual Price) If…

Q: What makes a variance favorable? Give an example of a favorable variance involving materials. What…

A: Variance is the difference in the value of budgeted cost\quantity and the actual cost\quantity. When…

Question

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?

AI-Generated Solution

AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.

Unlock instant AI solutions

Tap the button
to generate a solution

Click the button to generate
a solution

SEE SOLUTION

Similar questions

The analysis of variance is an essential management accounting approach used to determine the cost of a product and its profitability. Managers use variance analysis to make judgments regarding the expenses of labour and materials that are incurred as a result of the production of a product or the provision of a service. In relation to the above, critically appraise five (5) differences between fixed and variable costs along with examples of each cost. Critically evaluate the purposes and features of marginal costing?
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 Kilogram
Why Fixed Overhead Volume Variance is said to be a favorable variance when the actual output is more than the budgeted output?
Which of the following equations can be used to compute a materials price variance (where AQ = actual quantity; SQ = standard quantity allowed; AP = actual price; SP = standard price)?
1-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.
The 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 costs
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 price
TRUE OR FALSE When actual production volume is less than expected volume, the production volume variance is unfavorable
Which of the following items would be useful to management in deciding whether to investigate the cause of a reported standard cost variance? O Cost-volume-profit analysis. O Simultaneous equations. O Linear regression analysis. O Iso-profit lines. Indifference probability.
What effect, if any, would you expect poor-quality materials to hare on direct labor variances?
Which 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 material
(b) Explain the reasons why Carad Co would be interested in the material price planning variance and the material price operational variance.