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Unformatted text preview: CHAPTER 7 FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROL 7-9 Possible causes of a favorable direct materials price variance are: • purchasing officer negotiated more skillfully than was planned in the budget, • purchasing manager bought in larger lot sizes than budgeted, thus obtaining quantity discounts, • materials prices decreased unexpectedly due to, say, industry oversupply, • budgeted purchase prices were set without careful analysis of the market, and • purchasing manager received unfavorable terms on nonpurchase price factors (such as lower quality materials). 7-17 (15 min.) Flexible budget. The existing performance report is a Level 1 analysis, based on a static budget. It makes no adjustment for changes in output levels. The budgeted output level is 10,000 units––direct materials of $400,000 in the static budget ÷ budgeted direct materials cost per attaché case of $40....
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This note was uploaded on 02/23/2010 for the course ACCT 42312 taught by Professor Huh during the Fall '09 term at CSU San Bernardino.
- Fall '09