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)favorable direct materials cost variance.
B)unfavorable direct labor cost variance.
C)unfavorable direct labor efficiency variance.
D)favorable direct materials efficiency variance.

Question

Quizplus · Accepted Answer

The purchase of a higher grade of material should result in a favorable direct materials efficiency variance because it should reduce defects and waste, and therefore result in lower usage of the new material than would have been needed of the previous, lower-grade material. This should help offset the increased cost of the new material. The other choices are not directly related to the situation described.

The Production Manager of a Company Was Experiencing a High