QUESTION 21 Which department is often responsible for the direct materials price

Question

QUESTION 21 Which department is often responsible for the direct materials price variance? O The accounting department. O The production department. The purchasing department. The finance department. O The budgeting department. QUESTION 22 The following information relates to next years projected operating results of the Children's Division of Grunge Clothing Corporation: Contribution margin.. Fixed expensesm Net operating loss $200,000 500,000 ($300 000) f Children's Division is dropped, half of the fixed costs above can be eliminated. What will be the effect on Grunge's profit next year if Children's Division is dropped instead of being kept? $50,000 increase $250,000 increase $250,000 decrease $550,000 increase

Explanation / Answer

Question 21:

The direct material price variance is a measure of how effectively the price of direct materials is controlled. The direct materials are purchased by the purchasing department. Thus, the purchasing department is responsible for direct materials price variance.

Question 22:

The impact if the Chilldren's division is dropped= Contribution margin- Fixed expenses

=$0-($500000/2)=($250000)

Thus, the operating income would increase by $50000 as compared to the current level.

Correct answer is the first one.

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