Question

Which department should usually be held responsible for an unfavorable materials price variance?

Answer 1

Available options are:

A. Production.

B. Materials Handling.

C. Engineering.

D. Purchasing.

Answer:

D. Purchasing

Step-by-step explanation:

The reason is that the price variance is because of the fact that the purchasing department didn't assessed the market conditions and as a result lost a great opportuntity to purchase the material at low price. Their might be other factors which are as under:

1. Didn't took any bulk discounts
2. The price of material in the market was high
3. Material was short in the market

Answer 2

Answer: Procurement Department

Step-by-step explanation:

Unfavorable or Adverse Variance means that actual cost is greater than standard cost. For price the procurement department is responsible for purchasing on behalf of the firm, so they are charged with the responsibility of purchasing products with the least price without compromising quality.

If they have purchased wrongly and they end up paying more that what was budgeted for then that’s unfavorable.