Why Is the Direct Materials Price Variance Based on the Quantity

question 170

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)It is a simpler process to calculate the quantity variance on what is purchased.
• D)Managers are required by GAAP to isolate the price variance at the latest point possible.

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Definitions:

Subducts

Occurs when one tectonic plate moves under another and sinks into the Earth's mantle due to plate tectonic processes.

Subduction Zone

A region at convergent plate boundaries where one tectonic plate moves under another into the mantle, often causing earthquakes and volcanic activity.

Seawater

The saltwater that makes up the oceans and seas covering more than 70% of the Earth's surface, comprising a complex solution of various salts and minerals.

Mid-Ocean Ridge

A subaquatic chain of mountains created by the movement of tectonic plates, leading to the formation of new ocean floor.