Loren Company recently purchased materials from a new supplier at a very attractive price. The materials were found to be of poor quality, and the company's laborers struggled significantly as they shaped the materials into finished product.
In a desperation move to make up for some of the time lost, the manufacturing supervisor brought in more-senior employees from another part of the plant. Which of the following variances would have a high probability of arising from this situation?
A) Material price variance, favorable.
B) Material quantity variance, unfavorable.
C) Labor rate variance, unfavorable.
D) Labor efficiency variance, unfavorable.
E) All of the answers are correct.

Question

Quizplus · Accepted Answer

The situation described leads to a favorable material price variance due to the attractive price of the materials, an unfavorable material quantity variance because the poor quality likely required using more materials, an unfavorable labor rate variance due to the higher wages of more-senior employees, and an unfavorable labor efficiency variance because of the struggle with the materials, leading to less efficient work.

Loren Company Recently Purchased Materials from a New Supplier at a Very