Question

Delicious Food Products is famous for its trail mix. The main ingredient of the trail mix is dried fruit, which Delicious purchases by the pound. In addition, the production requires a certain amount of direct labor. Delicious uses a standard cost system, and at the end of the first quarter, there was an unfavorable direct materials efficiency variance. Which of the following is a logical explanation for that variance? A. The production staff changed the work flow process so that production required fewer direct labor hours. B. The production manager negotiated a lower wage package for production staff, bringing direct labor costs down. C. The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of dried fruits during their training period D. The purchasing manager was able to secure a volume discount on than the amount set by standard. dried fruit, purchasing the fruit for less

Answer 1

Answer:

The correct answer is D. The purchasing manager was able to secure a volume discount on than the amount set by standard. dried fruit, purchasing the fruit for less.

Explanation:

Possibly the manager did not take into account the type of influence that acquiring dried fruit would have at a different value, and this caused the measurement of the standard cost vs. the actual cost of direct material. Whenever changes are made in the purchasing process and others related to the production of dried fruit, it is necessary to review whether the standard is corrected by means of a detailed study considering the impact it may have on the final sale price, since apart from of the costs, the profit margin for your products must be estimated, considering that an increase in it can have a negative impact on the purchase decision.