Acc400 Accounting for Decision Making: Exercise 24.8 Interpreting Variances

Acc400 Accounting for Decision Making

Exercise 24.8 Interpreting Variances
The manager of a manufacturing firm received the following information related to the last period's direct materials and direct labor variances:
Direct materials price variance: Favorable
Direct materials quantity variance: Favorable
Direct labor rate variance: Unfavorable
Direct labor efficiency variance: Favorable

a. Ignoring all other variances, what are possible reasons for a favorable direct materials price variance?
b. Given that the quality of direct materials purchased was exactly as expected, how would you explain the above combination of the four variances?
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