# Answer true diff 2 objective 5 aacsb analytical

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Answer: TRUE Diff: 2 Objective: 5 AACSB: Analytical thinking 30) Direct material price variance is likely to be unfavorable if the purchasing manager switched to a lower-price supplier. Answer: FALSE Explanation: Direct material price variance is likely to be favorable if the purchasing manager switched to a lower-price supplier. Diff: 2 Objective: 5 AACSB: Analytical thinking 31) With disregard to other factors, direct manufacturing labor efficiency variance is likely to be unfavorable if underskilled workers are put on a job. Answer: TRUE Diff: 2 Objective: 5 AACSB: Analytical thinking
32) Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get material Y. Currently, the standard cost of material Y is \$4.25 per gram. During February, 22,000 grams were purchased for \$4.40 per gram, while only 20,000 grams were used in production. There was no beginning inventory of material Y. Required: a. Determine the direct materials price variance, assuming that all materials costs are the responsibility of the materials purchasing manager. b. Determine the direct materials price variance, assuming that all materials costs are the responsibility of the production manager. c. Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption. Answer: a. Material price variance = 22,000 × (\$4.40 - \$4.25) = \$3,300 unfavorable b. Material price variance = 20,000 × (\$4.40 - \$4.25) = \$3,000 unfavorable c. Measuring the price variance at the time of materials purchased is desirable in situations where the amount of materials purchased varies substantially from the amount used during the period. Failure to measure the price variance based on materials purchased could result in a substantial delay in determining that a price change occurred. Also, if the purchasing manager is to be held accountable for his/her purchasing activities, it is appropriate to have the materials price variances computed at the time of purchase so the manager can include the variances on his/her monthly report. This encourages the purchasing manager to be more responsible for the activities under his/her control. It provides a closer relationship between responsibility and authority and becomes a relevant performance measure. Diff: 2 Objective: 6 AACSB: Application of knowledge
33) During February the Lungren Manufacturing Company's costing system reported several variances that the production manager was surprised to see. Most of the company's monthly variances are under \$125, even though they may be either favorable or unfavorable. The following information is for the manufacture of garden gates, its only product: 1. Direct materials price variance, \$800 unfavorable.