If a company follows a practice of isolating variances at the earliest point in time,what would be the appropriate time to isolate and recognize a direct material price variance?
A) When material is issued.
B) When material is purchased.
C) When material is used in production.
D) When production is completed.

Question

Quizplus · Accepted Answer

The direct material price variance should be isolated and recognized at the time of purchase, as this is when the company can determine whether they paid more or less for the materials than the expected price. Isolating the variance at this point allows the company to take action, such as negotiating better prices or choosing different suppliers, to reduce the variance in future periods.

If a Company Follows a Practice of Isolating Variances at the Earliest