Coffey Company maintains a large inventory of direct materials due to the critical demands placed on it
Question:
Coffey Company maintains a large inventory of direct materials due to the critical demands placed on it for rush orders from large hospitals. Item A contains hard-to-find Y material. Currently, the standard cost of material Y is $4.00 per gram. During February, 22,000 grams were purchased at $4.10 per gram, while only 20,000 grams were used in production. There was no beginning inventory for material Y.
Required:
a. Determine the direct materials price variance, assuming all material costs are the responsibility of the materials purchasing manager.
b. Determine the direct materials price variance, assuming that all material costs are the responsibility of the production manager.
C. Discuss the issues involved in determining the price change at the point of purchase versus the point of consumption.
Managerial Economics and Strategy
ISBN: 978-0321566447
1st edition
Authors: Jeffrey M. Perloff, James A. Brander