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Question
Wren Company determined that in the production of their products last period; they had a favorable price variance and an unfavorable quantity variance for direct materials. What might be the cause(s) of this pattern of variances?
It is possible that the production department found ways to reduce material waste and the purchasing department was able to reduce the cost of materials at the same time. However, the company's purchasing manager may have purchased inferior materials to save costs that might have caused production to waste more materials than expected. The favorable price variance may not be worth what it cost if materials were wasted.
Answer
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