The Procurement Manager Was Able to Bring Down the Cost

question 118

Multiple Choice

The procurement manager was able to bring down the cost of direct materials by purchasing materials of a slightly lower grade quality than the company had used previously. The lower grade of materials, however, meant a higher defect rate on the assembly line, and higher wastage of materials during production, which in turn lowered operating income. This situation could have produced which of the following variances?

• A) Favorable materials price variance
• B) Favorable labor price variance
• C) Unfavorable labor efficiency variance
• D) Favorable materials efficiency variance

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