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?

Answer 1

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

1,000 more pounds of materials were used than budgeted, and that can only mean that the workers didn't do their job properly and wasted materials, or the new materials purchased at a lower cost were not the same quality as previously purchased materials.

Step-by-step explanation:

The other options are wrong because:

• A. The overall materials variance is positive, no further analysis is necessary. = FALSE, YOU DO NOT USE LESS MATERIALS FOR PRODUCING SOMETHING, OR IF YOU DO, THEN YOU DID SOMETHING WRONG.
• C. The purchasing manager paid more than expected for materials. = FALSE, THE PRICE OF MATERIALS ACTUALLY WAS LOWER = $97,000 / 25,000 LBS. = $3.88 PER LB. WHICH IS CHEAPER THAN $4
• D. Production workers were more efficient than anticipated. = FALSE, EFFICIENCY CAN DECREASE PRODUCTION TIME, MACHINE USE OR TOTAL OUTPUT, BUT IT DOESN'T EXPLAIN LESS MATERIALS USED.

Answer 2

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

Step-by-step explanation:

Actual material used per unit of output 27000/13000=2.08pounds which is more than the budgeted used =2 pounds per unit, therefore it can be a possible explanation.