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Price variance and quantity variance.

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Explain why the quantity purchased is used in computing the direct materials price variance, but the actual quantity consumed is used in computing the direct materials quantity variance. Why does an analogous question not arise in the context of the direct labor variance?

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Solution Summary

Your tutorial tells you why the amount purchases and the amount used differ and why this does not arise for labor.

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The price variance from standard is known as soon as the materials are purchased and so the full impact of the variance is on the amount purchased.

The quantity used is not known at the time of the purchase and so it is ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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