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 would have led to a(n)________.
A) unfavorable direct materials cost variance
B) favorable direct labor cost variance
C) favorable direct labor efficiency variance
D) unfavorable direct materials efficiency variance

Question

Quizplus · Accepted Answer

The choice of a lower grade of direct materials leading to a higher defect rate and higher wastage during production directly impacts the efficiency with which these materials are used. This results in an unfavorable direct materials efficiency variance because more materials are needed than planned for the same level of production, indicating inefficiency in the use of materials.

The Purchasing Manager Was Able to Bring Down the Cost