AQ060-3-2-MAT Individual Assignment Page 3 of 4 QUESTION 2 Forest Product Ltd uses the following rule determine whether material usage variances ought to be investigated: A materials usage variance will investigated when the amount exceeds 10 percent of the standard cost. Reports for the past five weeks provided the following information: Week MUV Standard Materials Cost $7,000 F $7,800 U $6,000 F $9,000 U $7.000 U $80,000 $75,000 $80,000 $85,000 $69,000 2 3 4 REQUIRED (a) Using the rule provided, identify the cases that will be investigated. (4 marks) Suppose investigation reveals that the case of an unfavourable materials usage variance is the use of lower-quality materials than are usually used. Explain who is responsible and what corrective action would likely be taken. (b) (8 marks) Suppose investigation reveals that the cause of a significant unfavourable materials usage (c) variance is attributable to a new approach to manufacturing that takes labour time but causes mare material waste. Examination of the labour efficiency variance reveals that it is favourable and larger than the unfavourable materials usage variance. Explain who is responsible and what action should be taken. (8 marks) (Total: 20 marks) AQ060-3-2-MAT Individual Assignment Page 3 of 4 QUESTION 2 Forest Product Ltd uses the following rule determine whether material usage variances ought to be investigated: A materials usage variance will investigated when the amount exceeds 10 percent of the standard cost. Reports for the past five weeks provided the following information: Week MUV Standard Materials Cost $7,000 F $7,800 U $6,000 F $9,000 U $7.000 U $80,000 $75,000 $80,000 $85,000 $69,000 2 3 4 REQUIRED (a) Using the rule provided, identify the cases that will be investigated. (4 marks) Suppose investigation reveals that the case of an unfavourable materials usage variance is the use of lower-quality materials than are usually used. Explain who is responsible and what corrective action would likely be taken. (b) (8 marks) Suppose investigation reveals that the cause of a significant unfavourable materials usage (c) variance is attributable to a new approach to manufacturing that takes labour time but causes mare material waste. Examination of the labour efficiency variance reveals that it is favourable and larger than the unfavourable materials usage variance. Explain who is responsible and what action should be taken. (8 marks) (Total: 20 marks)