The purchasing manager was able to bring down the cost of direct materials by purchasing direct materials of a slightly lower grade quality than the company had used previously.The lower grade of direct materials,however,meant a higher defect rate on the assembly line and higher wastage of direct materials during production,which in turn lowered operating income.This situation would lead to a(n)________.
A) favorable direct materials cost variance
B) unfavorable direct labor cost variance
C) favorable direct labor efficiency variance
D) favorable direct materials efficiency variance

Question

Quizplus · Accepted Answer

The purchasing manager's action of buying lower-grade materials at a reduced cost directly leads to a favorable direct materials cost variance because the materials were purchased for less than the standard cost. However, this decision negatively impacted the production process, increasing defects and wastage, but the question specifically asks about the variance related to the cost of direct materials, not the efficiency or the impact on other variances.

The Purchasing Manager Was Able to Bring Down the Cost