Assume the company's threshold for determining the materiality of each variance is 5% of its flexible budget cost. Calculate the significance level of each DM variance in comparison to the DM flexible budget cost. Calculate the significance level of each DL variance in comparison to the DL flexible budget cost. Compare each variance's significance level to the company's threshold of 5%. Which of these variances (if any) are concerning (i.e., material) to the company? (Round answers to 2 decimal places, e.g. 15.25%.)
Assume the company's threshold for determining the materiality of each variance is 5% of its flexible budget cost. Calculate the significance level of each DM variance in comparison to the DM flexible budget cost. Calculate the significance level of each DL variance in comparison to the DL flexible budget cost. Compare each variance's significance level to the company's threshold of 5%. Which of these variances (if any) are concerning (i.e., material) to the company? (Round answers to 2 decimal places, e.g. 15.25%.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Hh1.
Need help with DM Price variance percentage
Transcribed Image Text:Your answer is partially correct.
Assume the company's threshold for determining the materiality of each variance is 5% of its flexible budget cost. Calculate the
significance level of each DM variance in comparison to the DM flexible budget cost. Calculate the significance level of each DL
variance in comparison to the DL flexible budget cost. Compare each variance's significance level to the company's threshold of
5%. Which of these variances (if any) are concerning (i.e., material) to the company? (Round answers to 2 decimal places, e.g.
15.25%.)
DM price variance
DM efficiency variance
DL price variance
DL efficiency variance
2.44 %
4.76
%
0.32 %
8.43 %
Not Material
Not Material
Not Material
Material
Transcribed Image Text:The trial balance for Novak Corporation shows the following for its DM and DL variances at year-end, prior to closing entries.
DM price variance
DM efficiency variance
DL price variance
DL efficiency variance
Debit
$10,600
610
16,010
Credit
$5,840
Throughout the year, actual purchase costs for DM totaled $233,900; transfers of DM cost into production totaled $233,100. The
total flexible budget DL cost was $189,900 this year.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education