Question

Metal Shelf Company's standard cost for raw materials is $4.00 per pound and it is expected that each metal shelf uses two pounds of material.

During October Year 2, 25, 000 pounds of materials are purchased from a new supplier for $97, 000 and 13, 000 shelves are produced using 27, 000 pounds of materials.

Which statement is a possible explanation concerning the direct materials variances?

A. The overall materials variance is positive, no further analysis is necessary.

B. The production department had to use more materials since the quality of the materials was inferior.

C. The purchasing manager paid more than expected for materials.

D. Production workers were more efficient than anticipated.

Answer 1

Option B, Further products needed to be used by the production department because the goods quality was poor.

Explanation:

The associated content variation is the disparity between the generic prices of goods arising from manufacturing operations and the actual costs sustained.

The product cost variation is
`\$3,000` positive because 25.000 pounds of products have been sold for
`\$97,000`. Product production variability is
`\$4,000` undesirable although it took 27,000 pounds of product to manufacture 13,000 shelves
`(4.00* 1,000 \text { extra pounds})`.

It is likely that the goods obtained from a new vendor at a lower cost were of a lower quality which required additional products to be used in the process of production.