The production of a company was experiencing a high defect rate on the assembly line,which was slowing down the production and causing wastage of valuable materials.The production manager 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)________.

Question

Quizplus · Accepted Answer

The situation described refers to a higher cost of materials, which would produce an unfavorable direct materials cost variance. This means that the actual cost of the materials used is higher than the standard cost, which can negatively affect operating income. Direct labor cost variance and direct labor efficiency variance have not been mentioned in the scenario, so options B and C are not applicable. Direct materials efficiency variance would be relevant if there were issues with the quantity of materials used in the production process, but this is not mentioned either.

The Production of a Company Was Experiencing a High Defect