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?

Question

Quizplus · Accepted Answer

The use of lower grade direct materials resulted in a higher defect rate on the assembly line and higher wastage of materials during production indicating lower efficiency in the use of materials, resulting in an unfavorable materials efficiency variance. None of the other options are applicable in this situation.

The Procurement Manager Was Able to Bring Down the Cost