- This topic has 3 replies, 2 voices, and was last updated 8 years ago by
.
- Posts
Q148
The finance director of Paint Mixers Ltd has produced the table below showing the variance results for the first three months of the year:Jan Feb Mar
MAT price variance $3,000 A $2,000 A $1,000 A
MAT mix variance $2,000 A $750 A $100 A
MAT yield variance $4,000 A $2,000 A $50 FWhich of the following interpretations of the variances analysis exercise above is NOT correct?
A The purchasing manager should be able to threaten to switch suppliers to get better deals and address the adverse material price variance
B The materials mix variance is entirely under the control of the production manager
C The favourable yield variance in March could be the result of operational efficiency
D The responsibility for the initial poor performance must be borne by both the purchasing manager and the production manager————————————
The answer is supposed to be D with the explanation saying “The production manager controls both the mix and the production process and must alone bear responsibility for this initial poor performance”.But, what about adverse MAT price variance? Isn’t the purchasing manager responsible for it? I don’t understand Kaplan’s explanation Sir. Please help me out.
The answer is D, but the explanation you have quoted is confusing.
The production manager should bear responsibility for the mix and yield variances, and the purchasing manager should bear responsibility for the price variance.
Therefore (as the wording for D says) the responsibility for the initial poor performance must be borne by both managers.If you are saying that D is a correct statement, we are on the same page Sir. This is the confusing part because the question is to select an ‘INcorrect statement’.
If D is correct, which one is Not correct among the rest?
- You must be logged in to reply to this topic.