Employee theft of direct materials is likely to result in a(n)
A)unfavorable materials quantity variance.
B)unfavorable materials price variance.
C)favorable materials quantity variance.
D)favorable materials price variance.

Question

Quizplus · Accepted Answer

Employee theft of direct materials would result in a decrease in the actual amount of materials used, which would cause a negative variance in the materials quantity. This is because the expected quantity of materials used was based on the assumption that all materials were being used for production, whereas in reality some were being stolen. This would lead to a higher cost per unit of production, as the cost of the stolen materials would still be factored into the cost of the remaining produced units, resulting in an unfavorable variance.

Employee Theft of Direct Materials Is Likely to Result in A(n)