The Purchase of Inferior Direct Materials at a Lower Price

question 32

Multiple Choice

The purchase of inferior direct materials at a lower price might affect which of the following variances?

• A)materials price variance
• B)materials usage variance
• C)labour efficiency variance
• D)all of the above

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Definitions:

Socially Optimal Price

The pricing point where the societal benefits of consuming a good or service equal the societal costs of providing it, leading to an efficient allocation of resources.

Deadweight Loss

A loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is unattainable.

Graphically Depict

To represent data or information visually using charts, graphs, or other pictorial forms.

Deadweight Loss

The loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved or is distorted by external intervention.