A firm's purchasing manager bought poor quality material at a large saving. Because of the lower quality of material, more scrap was produced and because of the extra labour hours required an additional employee had to be hired to assist in the cutting operation. Assuming only the facts given, what variance(s) would result?
A) Favourable material price
B) Favourable material price; unfavourable material quantity; unfavourable labour efficiency
C) Favourable material price; unfavourable material quantity; unfavourable labour efficiency; unfavourable labour rate
D) Favourable material price; unfavourable labour efficiency

Question

Quizplus · Accepted Answer

The purchase of poor quality material at a large saving resulted in more scrap being produced, indicating an unfavourable material quantity variance. Additionally, an extra employee had to be hired, indicating an unfavourable labour efficiency variance. However, there was a saving on the material price, resulting in a favourable material price variance.

A Firm's Purchasing Manager Bought Poor Quality Material at a Large