Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Responsibility for Variances In accounting, responsibility is attached to whoever has the best information regarding a situation. In variance investigation, the manager starts first with
Responsibility for Variances In accounting, responsibility is attached to whoever has the best information regarding a situation. In variance investigation, the manager starts first with the department that knows the most about the issues surrounding the variance. For example, the role of the Purchasing Department is to purchase materials and, as a result, it is responsible for any direct materials price variance. This department is most familiar with the reasons for any price difference from standard. The production supervisor is most familiar with the reasons for labor efficiency or inefficiency. This does not mean that these departments are "to blame" for the variance. Recall that variances are tagged "favorable" or "unfavorable" but that these labels do not mean "good" or "bad." Instead, they just indicate the direction of the variance from standard. In investigating the materials price variance, a manager would go first to the Purchasing Department In investigating the materials usage variance, a manager would go first to the Production supervisor In investigating the labor rate variance, a manager would go first to the Human Resources Department In investigating the labor efficiency variance, a manager would go first to the Production supervisor A large unfavorable materials usage variance coupled with a large favorable materials price variance could mean more expensive, difficult to work with materials were purchased. X In the above case , who is responsible? Purchasing Department A large unfavorable labor rate variance coupled with a large favorable labor efficiency variance could mean lower paid workers left and were replaced with higher paid, more experienced, workers Responsibility for Variances In accounting, responsibility is attached to whoever has the best information regarding a situation. In variance investigation, the manager starts first with the department that knows the most about the issues surrounding the variance. For example, the role of the Purchasing Department is to purchase materials and, as a result, it is responsible for any direct materials price variance. This department is most familiar with the reasons for any price difference from standard. The production supervisor is most familiar with the reasons for labor efficiency or inefficiency. This does not mean that these departments are "to blame" for the variance. Recall that variances are tagged "favorable" or "unfavorable" but that these labels do not mean "good" or "bad." Instead, they just indicate the direction of the variance from standard. In investigating the materials price variance, a manager would go first to the Purchasing Department In investigating the materials usage variance, a manager would go first to the Production supervisor In investigating the labor rate variance, a manager would go first to the Human Resources Department In investigating the labor efficiency variance, a manager would go first to the Production supervisor A large unfavorable materials usage variance coupled with a large favorable materials price variance could mean more expensive, difficult to work with materials were purchased. X In the above case , who is responsible? Purchasing Department A large unfavorable labor rate variance coupled with a large favorable labor efficiency variance could mean lower paid workers left and were replaced with higher paid, more experienced, workers
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started