LST Entered into a New Contract with One of Its

question 53

Multiple Choice

LST entered into a new contract with one of its raw material suppliers. The new contract required the supplier to deliver raw materials with a 24-hour notice from LST. This reduces LST's material handling costs, but has increased the cost of the raw materials delivered. Which of the following variances is most likely to result?

• A) Unfavorable direct material price variance
• B) Favorable direct price variance
• C) Unfavorable variable overhead spending variance
• D) Unfavorable fixed overhead spending variance

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Definitions:

Perfect Prototype

An ideal or optimal model of a process, product, or concept that serves as a standard for replicating or comparing similar entities.

Bounded Rationality

A concept that individuals make decisions based on the limited information they have available and their own mental limitations.

Nobel Prize

A set of international awards given annually in several categories including Peace, Literature, and various sciences, recognizing significant contributions to humanity.

Herbert Simon

An American economist, political scientist, and cognitive psychologist known for his research in the fields of decision-making and artificial intelligence, including the concept of "bounded rationality."