ECONOMICS

Detailed explanation-1: -The investigation of materials price variance usually begins in the accounts payable department.

Detailed explanation-2: -The investigation of a materials price variance usually begins in the purchasing department. Labor quantity variances usually result from misallocation of workers.

Detailed explanation-3: -The purchase price variance is the difference between the standard and actual cost per unit of the direct materials purchased, multiplied by the standard number of units expected to be used in the production process. This variance is the responsibility of the purchasing department.

Detailed explanation-4: -Hence, it is the production department that is responsible for the labor price variance.

Detailed explanation-5: -When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost. Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances.