Which department would normally be responsible for the direct material price variance?

Question

A. The accounting department.
B. The production department.
C. The purchasing department.
D. The finance department.
E. Both B and C.

Answer 1

B.The production department.

The account Direct Materials Usage Variance will have a debit entered when the actual quantity of direct material USED is greater than the standard quantity for the good output. If the actual quantity of direct material is less than the standard quantity of direct material for the good output, a credit is entered into the usuage variance account.

If the standards are realistic, a manufacturer would be pleased with a zero balance in its variance accounts. A credit balance in a variance account signifies that things were better than standard. A debit in a variance account indicates that things were worse than the standard.