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A company reports planning and operational variances to its managers. The following data are available concerning the price of direct material M in the last period. Material M is the only material used by the company. The company operates a just-in-time (JIT) purchasing system.
Which TWO of the following statements about last period are definitely correct based on this information?
The direct material price operational variance was adverse.
Suggested Answer: D
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36 comments · newest first
SH
Shawna
11 months ago
Seems like a tricky situation with JIT in play!
SO
Sol
11 months ago
I think the price planning variance was favorable.
VI
Vincenza
11 months ago
Wait, how can we be sure about the usage variance?
BE
Berry
12 months ago
Totally agree with that!
TI
Tijuana
12 months ago
The direct material price operational variance was adverse.
MA
Mariann
1 year ago
I feel like I might be mixing up the definitions of planning and operational variances. I need to be careful with my choices on this one.
MA
Mary
1 year ago
This question seems similar to one we practiced where we had to determine if variances were favorable or adverse based on given data. I hope I can apply that knowledge here.
DA
Danica
1 year ago
I think the planning variance relates to the budgeted price versus the actual price, but I'm not entirely sure how that affects the operational variance here.
CO
Corinne
1 year ago
I remember that operational variances are calculated based on actual performance, so if the price variance is adverse, it means we paid more than expected.
HE
Helene
1 year ago
I'm confident that the direct material price planning variance was adverse, since the actual price was higher than the standard price. But I'm not sure about the usage variance.
CA
Catina
1 year ago
Based on the data provided, I can see that the actual price of material M was higher than the standard price. So the direct material price operational variance must have been adverse.
EV
Eva
1 year ago
Hmm, I'm a bit confused by the concept of price and usage variances. I'll need to review my notes on that before attempting to answer.
VA
Van
1 year ago
Okay, let's think this through step-by-step. The key information I need to focus on is the price of the direct material M and the variances reported.
LU
Ludivina
1 year ago
The question is asking which TWO statements are definitely correct. I think I can rule out the usage variance being adverse, since the question doesn't provide any information about usage. So I'll focus on the price variances.
AD
Adaline
1 year ago
I'm a bit unsure about this one. Let me re-examine the image and definitions to see if I can figure out the right components.
CA
Carol
1 year ago
Okay, I've got this. The key here is to ensure the incident is properly closed out, which means confirming the root cause and the changes required. Option B is the way to go.
VI
Virgilio
1 year ago
I remember practice questions focused a lot on medical history and risk factors, so I want to say that assessment of work history might be the odd one out here.
BA
Bambi
1 year ago
I just hope the managers don't try to blame the price hikes on the intern who spilled coffee on the accounting system. That would be a real material mistake!
MA
Maryann
1 year ago
B) The direct material price planning variance was adverse.
SH
Shay
1 year ago
A) The direct material usage operational variance was adverse.
CA
Carey
1 year ago
This is a tough one, but I'd say the correct answers are B and D. The planning variance was adverse, and the operational variance was favorable. Unless, of course, the company's accountants are playing some sort of diabolical mind game with us. In that case, all bets are off!
CL
Clement
1 year ago
I agree, it's a tricky situation. We'll have to wait and see what the final report says.
OM
Omer
1 year ago
But I'm not so sure about the operational variance, it could go either way.
SH
Sheron
1 year ago
I think you're right, the planning variance was definitely adverse.
BR
Brande
2 years ago
I'm guessing the direct material usage operational variance was also adverse. With those price hikes, the managers are probably stressing out trying to find ways to cut costs. Maybe they could try sacrificing the interns to the accounting gods?
IV
Ivette
1 year ago
C) The direct material price planning variance was favourable.
RE
Refugia
1 year ago
I hope they figure out a solution soon. Sacrificing interns might not be the best idea.
DE
Desmond
1 year ago
B) The direct material price planning variance was adverse.
PA
Paris
1 year ago
A) The direct material usage operational variance was adverse.
KE
Kenneth
2 years ago
Well, the data shows the price went up, so the direct material price planning variance must have been adverse. Looks like someone's getting a stern talking-to from the higher-ups.
KA
Kayleigh
1 year ago
B) The direct material price planning variance was adverse.
CH
Chaya
1 year ago
A) The direct material usage operational variance was adverse.
LE
Levi
2 years ago
Hmm, let's see. Since the company operates a JIT system, I'd say the direct material price operational variance was probably favorable. Gotta love those just-in-time savings!
LO
Lonna
2 years ago
But the company operates a JIT purchasing system, so the price planning variance should be favourable.
RO
Ronny
2 years ago
I disagree, I believe the direct material price planning variance was favourable.
LO
Lonna
2 years ago
I think the direct material price planning variance was adverse.