The Flexible Budget Breaks Down into the Price and Quantity

question 191

Essay

The flexible budget breaks down into the price and quantity variances for direct materials.

Required:

a. List two reasons why actual prices might differ from standard prices, resulting in a direct materials price variance.

b. List two reasons why actual materials usage might differ from standard material usage, resulting in a direct materials quantity variance.

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Definitions:

Quality

A measure of excellence or a state of being free from defects, deficiencies, and significant variations, brought about by strict and consistent adherence to measurable and verifiable standards to achieve uniformity of output that satisfies specific customer or user requirements.

Perceptual Map

Displays, in two or more dimensions, the position of products or brands in the consumer’s mind.

Ideal Points

Preferences or positions considered most favorable or desirable by an individual or group, often used in the context of marketing to tailor products or services.

Producer

An individual or enterprise responsible for creating and supplying goods or services to consumers or other businesses.