ExpertACCA · Question 29 · Responsibility Accounting
Section B - Case 3: UrbanTransit
UrbanTransit operates a fleet of municipal buses. The company uses a standard costing system to monitor fuel costs.
At the start of the year, the original standard price for diesel was set at $2.00 per liter.
Mid-year, due to a global geopolitical shock, the market price of diesel surged. Management revised the standard price to $2.50 per liter to reflect uncontrollable market conditions.
During the last quarter, UrbanTransit purchased and used 100,000 liters of diesel at an actual total cost of $260,000.
Which TWO of the following statements regarding responsibility for these variances are correct?
Section B - Case 3: UrbanTransit
UrbanTransit operates a fleet of municipal buses. The company uses a standard costing system to monitor fuel costs.
At the start of the year, the original standard price for diesel was set at $2.00 per liter.
Mid-year, due to a global geopolitical shock, the market price of diesel surged. Management revised the standard price to $2.50 per liter to reflect uncontrollable market conditions.
During the last quarter, UrbanTransit purchased and used 100,000 liters of diesel at an actual total cost of $260,000.
Which TWO of the following statements regarding responsibility for these variances are correct?
Answer options:
The purchasing manager should be held accountable for the $50,000 planning variance.
The purchasing manager should be held accountable for the $10,000 operational variance.
The planning variance indicates that the original budget was based on faulty assumptions or unforeseen external events.
The operational variance should be ignored because the market is too volatile.
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