Olsen Company Uses a Standard Cost System for Its Only

question 61

Essay

Olsen Company uses a standard cost system for its only product. The bickering between purchasing and production that occurs every month after the material variances are developed has the production vice president, Mr. Becker, at his wits end. He has checked the job descriptions of the individuals involved and notes that the purchasing department is responsible for the price at which materials and supplies are purchased and the manufacturing department is responsible for the quantity of material used. This seems very clear cut to him so he has gone to the cost accountant for some additional help.
Required:
As the cost accountant, explain to Mr. Becker why, or why not, this division of duties solves the conflict between price and quantity variances.

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Definitions:

Lens

A curved piece of glass or other transparent material that focuses or refracts light, used in optical devices like glasses, cameras, and microscopes.

Retina

A thin layer of tissue at the back of the eye that contains the cells responsible for converting light into neural signals for vision.

Saturation

In color theory, the intensity of a color expressed as the degree to which it differs from white.

Amplitude

The height or strength of a wave signal, which in various contexts can describe the intensity of things like sound, light, or electrical signals.