Question

The materials price and efficiency variances could be an indication that the company purchased less expensive ingredients of higher ​quality, which resulted in more than the standard number of rejected units. The labor price variance suggests that more experienced workers may have worked​ more, resulting in a faster work pace and a higher than normal amount of rejects or waste.
a. True
b. False

Answer 1

Answer:

The answer to the question is False.

Explanation:

Materials Price and Efficiency Variance measures cost of materials purchased against the amount budgeted for it. When materials which are higher in quality are purchased at a lower price, the Materials Price Variance is said to be favorable. This means that it should lead to a lower number of rejected units given that one purchased materials of higher quality.    

 

Labor price variance is favourable if the actual cost of labor to the organisation fall below the budgeted amount.

The measure of expected output from a certain input of materials is referred to as material yield variance. Material yield variance is directly related to labour efficience variance.

A favorable labor price/material yield variance should result in faster work pace and lower of waste or rejects.

Therefore the above assertions are false.

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