Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance.

Question

Quizplus · Accepted Answer

A favourable materials price variance occurs when the actual cost of materials is less than the expected cost, but purchasing poor quality materials can lead to inefficiencies in production, causing an unfavourable labour efficiency variance, not necessarily a labour rate variance. Labour rate variance focuses on the rate paid to workers, not the efficiency of their work.

Purchase of Poor Quality Materials Will Generally Result in a Favourable