LST Corporation entered into a new contract with one of its raw material suppliers. The new contract required the supplier to deliver raw materials with a 24-hour notice from LST. This reduces LST's material handling costs, but has increased the cost of the raw materials delivered. Which of the following variances is most likely to result?
A) Unfavorable direct material price variance
B) Favorable direct price variance
C) Unfavorable variable overhead spending variance
D) Unfavorable fixed overhead spending variance

Question

Quizplus · Accepted Answer

The increased cost of raw materials due to the new contract is likely to result in an unfavorable direct material price variance.

LST Corporation Entered into a New Contract with One of Its