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.

---

Definitions:

Untapped Markets

Markets or segments currently not being served or fully served by companies, representing potential opportunities for expansion or entry.

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services in an economy.

Emerging Market

Refers to economies that are in the process of rapid growth and industrialization, offering potential for high returns on investment.

Global Business School Network

A worldwide network aimed at improving business education through international collaboration, knowledge sharing, and capacity building.