Apply Standard Costing And Variance Analysis Practice Test

A manufacturing company, Apex Tools, uses a standard costing system with variance tracking by purchase order and production batch. The standard for Alloy A is $5.00 per pound, and 2.0 pounds are allowed per finished unit. During May, Apex produced 10,000 units; it purchased and used 20,500 pounds of Alloy A at $5.30 per pound. The materials price variance was flagged as significant versus policy thresholds and management asked for a corrective action focused specifically on the price variance. What corrective action should be taken based on the material price variance analysis?

A manufacturing company, NovaChem, uses standard costing and records material price variances at the time of purchase. The standard price for Solvent S is $7.50 per liter. In October, NovaChem purchased 18,000 liters at $7.20 per liter due to a temporary market discount, and the discount is not expected to continue. Management asks what corrective action is appropriate based on the favorable material price variance. What corrective action should be taken based on the material price variance analysis?