The production manager of a company was experiencing a high defect rate on the assembly line, which was slowing production and causing wastage of valuable materials. He decided to purchase a higher grade of material that would be more reliable, but he was worried that the cost of the new material might negatively affect operating income. This situation would have produced a(n):
A)unfavorable direct materials cost variance.
B)favorable direct labor cost variance.
C)favorable direct labor efficiency variance.
D)unfavorable direct materials efficiency variance.

Question

Quizplus · Accepted Answer

The situation described in the scenario suggests that the production manager decided to purchase a higher grade of material to reduce the defect rate, which would be expected to result in an improvement in direct materials efficiency. However, the concern about the cost of the new material and its potential impact on operating income suggests that the actual cost of materials may be higher than the budgeted cost, resulting in an unfavorable direct materials cost variance.

The Production Manager of a Company Was Experiencing a High