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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

The materials cost variance report for Nickols Inc. indicates a large favorable materials price variance and a significant unfavorable materials quantity variance. What might have caused these offsetting variances?

To determine

Direct material cost variances:

The difference between the actual material cost per unit and the standard material cost per unit for the direct material purchased is known as direct material cost variance. The direct material variance can be classified as follows:

    • Direct materials price variance.
    • Direct materials quantity variance.

To determine: The cause of offsetting variance.

Explanation

  • Due to the purchase of low priced inferior materials, the offsetting variances might have caused. Hence these low priced materials would have generated favorable materials price variances...

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