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)________.

Question

Quizplus · Accepted Answer

The procurement manager's action led to a favorable direct materials cost variance because the cost of materials was reduced. However, the lower quality resulted in inefficiencies, but the cost variance itself remains favorable due to the lower purchase price.

The Procurement Manager Was Able to Bring Down the Cost