ECONOMICS

Detailed explanation-1: -It is best to isolate the material quantity variance when the materials are purchased. When the material price variance is recorded at the time of purchase, raw materials are recorded as inventory at actual cost.

Detailed explanation-2: -10-9 The materials price variance can be computed either when materials are purchased or when they are placed into production. It is usually better to compute the variance when materials are purchased since that is when the purchasing manager, who has responsibility for this variance, has completed his or her work.

Detailed explanation-3: -Question: The materials quantity variance answers the question, did we use more or fewer direct materials in production than expected? If the variance is unfavorable, we used more than expected.

Detailed explanation-4: -If there is a material quantity variance, one or more of the following is usually the cause: Low quality of raw materials. Incorrect specification of materials. Raw materials obsolescence.

Detailed explanation-5: -A materials quantity variance compares the actual and expected direct material used in manufacturing a product. You have an unfavorable materials quantity variance when you use more material than expected. It’s favorable when you use less material than planned.