A company's purchasing department negotiates all of the purchasing contracts for raw materials.Which variance is most useful in assessing the performance of the purchasing department?

Question

Quizplus · Accepted Answer

The materials price variance measures the difference between the actual price paid for materials and the expected price. Since the purchasing department negotiates purchasing contracts for raw materials, they have control over the actual price paid for those materials. Therefore, the materials price variance is the most useful variance in assessing the performance of the purchasing department.

A Company's Purchasing Department Negotiates All of the Purchasing Contracts