Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

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Answer 1

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Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 11RQ

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Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

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Carichem Company produces sanitation products after processing specialized chemicals. The following relates to its activities:  1 Kilogram of chemicals purchased for $4000 and with an additional $2000 is processed into 400 grams of Crystals and 80 litres of a Cleaning agent. At split-off, a gram of Crystal can be sold for $2 and the Cleaning agent can be sold for $8 per litre.  At an additional cost of $800, Carichem can process the 400 grams of Crystal into 500 grams of Detergent that can be sold for $4 per gram. The 80 litres of Cleaning agent is packaged at an additional cost of $600 and made into 200 packs of Softener that can be sold for $4 per pack. Required: 1. Allocate the joint cost to the Detergent and the Softener using the following: a. Sales value at split-off method b. NRV method 2. Should Carichem have processed each of the products further? What effect does the allocation method have on this decision?

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Answer 2

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Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 11RQ

To determine

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Expert Solution & Answer

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Answer 3

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 11RQ

To determine

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Expert Solution & Answer

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Answer 4

Question

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

Chapter 10, Problem 11RQ

To determine

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Expert Solution & Answer

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Answer 5

Chapter 10, Problem 11RQ

To determine

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Answer 6

Chapter 10, Problem 11RQ

To determine

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Answer 7

Chapter 10, Problem 11RQ

To determine

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 10 - Prob. 1RQ Ch. 10 - What is meant by the phrase management by...Ch. 10 - Prob. 3RQ Ch. 10 - Prob. 4RQ Ch. 10 - Prob. 5RQ Ch. 10 - Prob. 6RQ Ch. 10 - What is the interpretation of the direct-material...Ch. 10 - What manager is usually in the best position to...Ch. 10 - What is the interpretation of the direct-material...Ch. 10 - Prob. 10RQ

Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

Solution Summary: The author explains that the quantity purchased is used in computing the direct-material price and quantity variances. The deviations between the standard and actual price are highlighted by the purchase price variance.

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Indicate the reason why “the quantity purchased is used in computing the direct-material purchase price variance, but the actual quantity consumed is used in computing the direct-material price and quantity variances”.

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