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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A8
Transcribed Image Text: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
2.49 %
4.76 %
0.32 %
43
%
Not Material
Not Material v
Not Material v
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
k
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.
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