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 would have led to a(n):
A)unfavorable direct materials cost variance.
B)favorable direct labor cost variance.
C)unfavorable direct labor efficiency variance.
D)unfavorable direct materials efficiency variance.

Question

Quizplus · Accepted Answer

The use of lower-grade materials led to higher wastage, which means more materials were used than planned, resulting in an unfavorable direct materials efficiency variance.

The Procurement Manager Was Able to Bring Down the Cost