If a purchasing agent is able to negotiate a price lower than that set by the current budget by purchasing direct materials of similar quality
A)a reduction in customer service costs will result.
B)the effect on the direct materials efficiency variance will be favourable.
C)the effect on the direct labour efficiency variance will be favourable.
D)the effect on the purchase rate variance will be favourable.
E)the effect on the direct materials efficiency variance will be unfavourable.

Question

Quizplus · Accepted Answer

The purchase rate variance, also known as the direct materials price variance, will be favorable because the purchasing agent was able to negotiate a lower price than budgeted for the direct materials.

If a Purchasing Agent Is Able to Negotiate a Price