Question

1. An unfavorable direct materials variance indicates that:

		Things are bad
		We may have purchased better quality of raw materials than planned
		We used more materials than what we had planned because our production was up
		All of the other answers are true

2. Which of the following segments would care about the transfer price, when selling to another division withing the company?

		Both a profit center and an investment center would care about the transfer price because they have their performance measured based on profits.
		A profit center
		A cost center
		An investment center

Answer 1

1. An unfavorable direct materials variance indicates that:

Unfavourable material variance is sum of direct material price variance and direct material quantity variance.So it could be due to higer qaulity purchase(thus higher price) or higher quantity usege.

Answer:- All of the above

2. Which of the following segments would care about the transfer price, when selling to another division withing the company?

A cost centre is basically a division that incurs only costs and donot make any revenue. Thus they are not bothered about the transfer price on sales.

Answer:- Both a profit center and an investment center would care about the transfer price because they have their performance measured based on profits