Why is the direct materials price variance based on the quantity of materials purchased,but the direct materials quantity variance on the quantity of materials used?
A)Managers need to isolate variances and take corrective action as soon as possible.
B)Production managers are only interested in the quantity purchased.
C)It is a simpler process to calculate the quantity variance on what is purchased.
D)All of these ans choices are correct.

Question

Quizplus · Accepted Answer

The direct materials price variance is based on the quantity of materials purchased because managers need to identify and take corrective action on any deviations from the expected cost of materials as soon as possible. On the other hand, the direct materials quantity variance is based on the quantity of materials used because production managers are interested in the efficiency of material usage during production. It is important to track both variances separately to identify where and how improvements can be made in the purchasing and production processes. The simplistic method of calculating the quantity variance on what is purchased is not a valid reason for this approach.

Why Is the Direct Materials Price Variance Based on the Quantity