Question - Miller Company manufactures good quality replacement parts for the automotive industry. A standard costing system is used by the Miller Company and we isolate variances as soon as they are found. Controlling of costs for the direct materials price variance is the responsibility of the purchasing manager for all raw materials used in production. Lately, direct material price variances have been favorable. But, unfavorable variances have been found in direct materials usage for quite a few items in addition to the total budget variance for direct materials during the last six months. The direct labors have made complaints about the quality of the raw materials which has also been noticed with major customers canceling orders. Miller Company has also found an increase in raw materials inventory by 240%.
Requirements:
1. Explain why these results have occurred by Miller Company. (For example, consider the implications of the purchasing manager.)
2. What improvements could be made in the performance reporting system in order for the purchasing manager to make better judgments?
Please prepare a response to parts 1 and 2 in memo form according to APA format. The memo should be limited to one full page.