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The Procurement Manager Was Able to Bring Down the Cost

question 94

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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?


Definitions:

Internal Differentiation

The division of labor and specialization within an organization that creates distinct roles and responsibilities.

Network-Designed Organization

An organizational structure that focuses on decentralization, where operations are connected by informal networks and the flow of information.

Virtual Organization

A company that operates online, often relying on a network of remote workers or partners, without a physical presence or traditional office space.

Organization's Design

The deliberate process of configuring structures, processes, reward systems, and people practices to create an effective organization capable of achieving the business strategy.

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