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Why a favorable direct materials price variance might be of concern?
Donovan443
A favorable direct materials price variance may be the result of the purchase of cheaper materials that may be of inferior quality, thereby causing an inferior product. An inferior quality can also cause more spoilage and waste.
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What does a favorable direct materials efficiency variance indicate?
A favorable direct materials efficiency variance indicates that you are using less material in production than was budgeted for.
What are the Causes of direct material quantity variance?
An unfavorable materials quantity variance means excessive use of direct materials. The excessive use of direct materials may be the result of a number of reasons including: inexperienced or untrained workers, lack of motivation, lack of proper supervision, use of outdated machinery, faulty equipment, purchase of unsuitable or substandard materials, and frequent power failures.
Causes of direct material quantity variance?
Some causes of direct material quantity variance are poor quality materials, untrained workers, and lack of supervision. Production managers should look at and determine the causes.
How does poor quality materials affect direct labor variance?
If poor quality materials are used it may cause insufficient demand for the products. Insufficient demand may not keep workers busy. If the workers are not being laid off, and unfavorable labor efficiency variance will often be recorded.
What causes direct labour rate variance?
Direct labor rate variance is caused by a change in the hourly rate from what you initially planned.
What does a favorable direct materials efficiency variance indicate?
A favorable direct materials efficiency variance indicates that you are using less material in production than was budgeted for.
What are the Causes of direct material quantity variance?
An unfavorable materials quantity variance means excessive use of direct materials. The excessive use of direct materials may be the result of a number of reasons including: inexperienced or untrained workers, lack of motivation, lack of proper supervision, use of outdated machinery, faulty equipment, purchase of unsuitable or substandard materials, and frequent power failures.
Causes of direct material quantity variance?
Some causes of direct material quantity variance are poor quality materials, untrained workers, and lack of supervision. Production managers should look at and determine the causes.
Which department is often responsible for the direct materials price variance?
Receiving can affect direct materials price variances if there is no inventory. The accounting department will mark up prices to reflect a shortage.
Why are variances generally segregated in terms of a price variance and an efficiency variance?
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
What is material cost variance?
The material cost variance denoting the difference between the standard cost of materials and actual cost of matrials. The material cost variance is between the standard material cost for actual production in units and actual cost. The total cost is usually determined by two differenct factors of influence viz quantity of materials utilized/ required and price of the materials. The fluctuations in the material cost are only due to the fluctuations in the utility of materials due to many factors. Material cost variance can be computed into two different ways: DIRECT METHOD AND INDIRECT METHOD material cost variance= Standard cost of materials for actual output- actual cost of raw materials. MCV=(S Q AO X SP)-(AQ X AP) Indirect Method: material cost variance= Material price variance (MPV)+Material usage Variance
How does poor quality materials affect direct labor variance?
If poor quality materials are used it may cause insufficient demand for the products. Insufficient demand may not keep workers busy. If the workers are not being laid off, and unfavorable labor efficiency variance will often be recorded.
What causes direct labour rate variance?
Direct labor rate variance is caused by a change in the hourly rate from what you initially planned.
What is direct labor variance?
It means the difference between the budgeted or estimated direct labour cost at the start of work activity with the actual direct labour cost at the end of activity or fiscal year. If budgeted cost is more then the actuall then it is favourable variance otherwise it is unfavourable direct labour cost variance
What are the causes direct material quantity variance?
what are some of the causes of material quntity variance of favourable amount
What does an unfavorable direct labor price variance indicate?
Unfavorrable direct labor price variance indicates that business has incurred more direct labor cost for production of units of product then standard labor cost. For example if standard cost of direct labor for producing 1 unit is 10 and company incurred 105 for making 10 units then extra 5 is unfavorable direct labor cost variance.
What are three reasons for an unfavorable direct manufacturing labor efficiency variance?
1) semi-skilled worker performing skilled work 2) inferior raw materials 3) poor process scheduling
