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Chapter 7

# Chapter 7 - Name Nguyen Xuan Thanh Class Friday afternoon...

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Name: Nguyen Xuan Thanh Class: Friday afternoon ID:1235735 CHAPTER 7 14 / a) The direct material price variance based on the quantity purchase: Material Price Variance = (AP × AQ p ) - (SP × AQ p ) = (12,800 x \$0.97) – (12,800 x \$0.95) = \$256 U b) The direct material quantity variance based on quantity used: Standard quantity of materials = 300 × 35 lbs. = 10,500 Material Quantity Variance = (SP × AQ u ) - (SP × SQ) = (10,700 x \$0.95) – (300 x 35 x \$0.95) = \$190 U c) The purchasing agent would be responsible for each of the variance. Explanations offered should consider the pattern of the variances. The pattern is an unfavorable price variance and a small unfavorable quantity variance. Perhaps the usage of material was higher than expected and the inventory fell below an acceptable level, requiring added transportation costs to replenish the inventory of materials quickly. The quantity variance could be just inefficiency in production or inferior material resulting in increased waste and shrinkage. d) Those variances cause by the weakness of production staff: to use more material to complete goods. 16

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Chapter 7 - Name Nguyen Xuan Thanh Class Friday afternoon...

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