Question

Long Hill LLC purchasing manager obtained a special price on a metal alloy from a new supplier, resulting in a direct-material price variance of $10,800F. The alloy produced more waste than normal, as evidenced by a direct-material quantity variance of $2,500U, and was also difficult to use. This slowed worker efficiency, generating a $3,000U labor efficiency variance. To help remedy the situation, the production manager used senior line employees, which gave rise to a $1,400U labor rate variance. If overall product quality did not suffer, what variance amount is best used in judging the appropriateness of the purchasing manager's decision to acquire substandard material?

Answer 1

$3,900 Favorable

Step-by-step explanation:

The computation of Static Budget Variance is shown below:-

Static Budget Variance = Direct-material quantity variance + Direct-material quantity variance + Labor efficiency variance + Labor rate variance

= $10,800 F - $2,500 U - $3,000 U - $1,400 U

= $3,900 Favorable

If the overall quality of the product has not suffered, the variance number is best used to determine the appropriateness of the purchasing manager's decision to purchase substandard material is $3,900 Favorable.