Question

If the AMD Ryzen 16-Core CPU saves $1,000 per computer manufactured, how would computer manufacturers’ variances be impacted?

AMD is rumored to be releasing a new 16-core, 32 thread CPU, that would be significantly more powerful than its competitors – and it would be about $1,000 less expensive than the closest Intel CPU. This AMD chip is named “AMD Ryzen” and it has six more cores than Intel’s current primary desktop CPU – the Core i7 (technically, the “Core i7-6950x.) (This class of CPUs is for power users; these CPUs are much more powerful than standard desktop CPUs.)

Question

How, if at all, would the $1,000 cost savings per CPU impact a computer manufacturer’s direct materials quantity variance in the short run?

Answer 1

Answer)

Here,the formula for diredct material quantity variance:

(Standard quantity-actual quantity)×standard price

If standard quantity is more than actual quantity then it will be a favorable variance.Similarly,if actual quantity is more than standard quantity then it is unfavorable variance.

If there is An unfavorable variance,it might be due to there is $1000 saving per computer unit which means there is use of low quality of material which is newded to be consumed more than that of high quality material.

If there is a favorable variance ,then the company must check in the market whether there is decreased usage of material by production department with a view to get saving on total cost which may have impact on quality. Otherwise there is efficient work from labour and quality of rawmaterial is in line of standards.

Here,in any case decrease in quality of rawmaterial have negative impact on Goodwill as producing low quality of goods than in the name of cost savings.