The Red Company Manufactures Decorative Scarecrows That Have a Standard

Essay

The Red Company manufactures decorative scarecrows that have a standard cost of $1.75 per pound for direct materials used in the manufacturing process. During October, 15,000 pounds of materials were purchased for $2.00 per pound, and 12,000 pounds were actually used in making 5,000 scarecrows. There were no beginning inventories.
Required:
a. Determine the materials price variance assuming that materials costs are the responsibility of the materials purchasing manager.
b. Determine the materials price variance assuming that materials costs are the responsibility of the production manager.
c. Determine the material quantity variance if the standard materials for each scarecrow are 3 pounds.
d. Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.