An unexpected disruption in rail service eliminated a company's usual supply of a critical raw material. To avoid a disruption in production, the material needed was obtained from a new vendor with which the company had no prior relationship. This event is likely to have produced:
A) An unfavorable material price variance.
B) A favorable material price variance.
C) An unfavorable material usage variance.
D) A favorable material usage variance.

Question

Quizplus · Accepted Answer

An unexpected disruption in rail service forcing a company to source materials from a new vendor likely leads to an unfavorable material price variance because the company may have to pay a premium price due to the urgent need and lack of established relationship with the new vendor.

An Unexpected Disruption in Rail Service Eliminated a Company's Usual