Coffey Company Maintains a Very Large Direct Materials Inventory Because

question 10

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 $4.00 per gram.During February,22,000 grams were purchased for $4.10 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.

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Definitions:

Bid Price

The highest price a buyer is willing to pay for a security or commodity.

Gross Trading Profit

The total profit from trading activities before deducting expenses and taxes.

Inside Quotes

The highest bid and lowest ask prices among all market makers in a particular stock, representing the most competitive prices at which you can buy or sell.

Limit Order Book

A record of all the outstanding buy and sell orders for a particular security or financial instrument, organized by price level.