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 a higher waste of direct materials during production,which in turn lowered operating income.This situation would lead to a(n)________.
A) favorable direct materials cost variance
B) unfavorable direct labor cost variance
C) favorable direct labor efficiency variance
D) favorable direct materials efficiency variance

Question

Quizplus · Accepted Answer

The purchasing manager's action of buying lower-grade materials at a reduced cost directly leads to a favorable direct materials cost variance because the materials cost less than what was previously budgeted or expected, despite the subsequent negative impacts on production and operating income.

The Purchasing Manager Was Able to Bring Down the Cost