Assignment Week 5 - since the company could purchase...

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Assignment Week - 5 1. The following variances are for July a. Direct Material Price and Quantity variances Material Price Variance = AQ (AP-SP) = 25,000($0.48-$0.50) = $500 (Favorable) Material Quantity Variance = SP (AQ-SQ) = $0.50(20,000-18,000) = $1000 (Unfavorable) b. Direct Labor Rate and Efficiency variances Labor Rate Variance = AH (AR-SR) = 4000($9.00-$8.00) = $4000 (Unfavorable)
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Labor Efficiency Variance = SR (AH-SH) = $8.00 (4000 – 3900) = $800 (Unfavorable) 2. Possible Causes of Each Variance - The Material Price Variance is Favorable; this could occur
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Unformatted text preview: since the company could purchase material at a discount and to take the advantage of the discount they purchased the material in large quantity. The purchasing department stuck a very good bargain.-The Material Quantity Variance was Unfavorable ; this could have occurred due to poorly trained workers, defective material and improper machinery.-Both Labor Rate Variance and Labor Efficiency Variance were Unfavorable ; this could have occurred due to poor supervision, poor trained workers etc....
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This note was uploaded on 09/08/2011 for the course ACCOUNTING AC505 taught by Professor Terrymulder during the Spring '09 term at Keller Graduate School of Management.

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Assignment Week 5 - since the company could purchase...

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