Question

10-1 What is a quality standard? What is price standard?

10-2 Why are separate price and quantity variance computed?

10-3 Who is generally responsible for the materials price variance? the materials quantity varience? the labor efficiency varience?

Answer 1

10-1) A Quantity standard is the amount of materials that should be used in the production of a single unit. Price standard is the price that should be paid for materials at a given level of activity.

10-2) Price and quantity variances are seperately computed because seperating price and quantity variances gives insight into what causes variances to be favorable or unfavorable, and is a tool useful for seeing if costs were too high or if too much material was used.

10-3) The materials price variance is usually the responsibility of the purchasing manager. The materials quantity and labor efficiency variances are usually the responsibility of production managers and supervisors.