Grey Manufacturing has prepared the following flexible budget for October and it is in the process of interpreting the variances.F denotes a favorable variance and U denotes an unfavorable variance.
Required:
a.Explain what each of the following variances indicates.
1.For Material A,the favorable price variance indicates that…
2.For Material A,the unfavorable quantity variance indicates that…
3.For direct labor,the unfavorable price variance indicates that…
4.For direct labor,the favorable efficiency variance indicates that…
b.Which two variances do you think should be investigated by management? Why?
Correct Answer:
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1. For Material A, the favorable pric...
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