Why Is the Direct Materials Price Variance Based on the Quantity

question 102

Multiple Choice

Why is the direct materials price variance based on the quantity of materials purchased, but the direct materials quantity variance on the quantity of materials used?

• A)Managers need to isolate variances and take corrective action as soon as possible.
• B)Production managers are only interested in the quantity purchased.
• C)The quantity used in production is not known until units are produced.
• D)Managers are required by GAAP to isolate the price variance at the latest point possible.

Learn the impact of transactions and events on the end-of-period cash balance.

Comprehend the differences between direct and indirect methods of reporting cash flows from operating activities.

Acquire knowledge on how current liabilities and assets adjustments are treated in the indirect method.

Distinguish between operating, investing, and financing activities in the context of cash flows.

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