Coffey Company Maintains a Very Large Direct Materials Inventory Because

question 14

Essay

Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get material Y. Currently, the standard cost of material Y is $4.25 per gram. During February, 22,000 grams were purchased for $4.40 per gram, while only 20,000 grams were used in production. There was no beginning inventory of material Y.
Required:
a.Determine the direct materials price variance, assuming that all materials costs are the responsibility of the materials purchasing manager.
b.Determine the direct materials price variance, assuming that all materials costs are the responsibility of the production manager.
c.Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.

---

Definitions:

Marketing Concern

Issues or areas of interest specific to the marketing field, such as customer satisfaction, brand perception, or market segmentation.

Equipment-based Services

Services that primarily rely on machinery and equipment to deliver value to customers, such as laundry or car rental services.

Intangibility

A characteristic of services that implies they cannot be seen, touched, or made tangible in the same manner as physical products.

Inseparability

A characteristic of services indicating that they are often produced and consumed simultaneously and cannot be separated from their provider.