I need an answer for these two question in 5 hrs1-If the material price variance is favorable but...

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I need an answer for these two question in 5 hrs1-If the material price variance is favorable but the quantity variance is unfavorable, what might this indicate?2-In what way can the use of ROI as a performance measure for investment centers lead to bad decisions? How does the residual income approach overcome this problem?
	
Document Preview: I need an answer for these two question in 5 hrs1-If the material price variance is favorable but the quantity variance is unfavorable, what might this indicate?2-In what way can the use of ROI as a performance measure for investment centers lead to bad decisions? How does the residual income approach overcome this problem?

David · Accepted Answer

1-If the material price variance is favorable but the quantity variance is unfavorable, what might 
this indicate? 
2-In what way can the use of ROI as a performance measure for investment centers lead to bad 
decisions? How does the residual income approach overcome this problem? 
Solution:- 
1) We often witness the situation where, material price variance is favorable but the quality 
variance is unfavorable. The reason behind such a situation is, the purchase manager’s 
always tries to fulfill their personal goals due to which they overlook the goal of the firm 
as a whole. Purchase manager’s compensation is directly related with the efficient 
purchases made by him,

I need an answer for these two question in 5 hrs 1-If the material price variance is favorable but the quantity variance is unfavorable, what might this indicate? 2-In what way can the use of ROI as a...

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