Question

The purchasing agent of an organization acquired some raw materials at a bargain price, even though she knew that their quality was lower than that of the materials customarily used. This action resulted in a favorable raw materials purchase price variance that might very well have been more than offset by:
a. an unfavorable raw materials usage variance
b. a favorable direct labor efficiency variance
c. an unfavorable variable overhead spending variance.
d. an unfavorable direct labor rate variance

Answer 1

Answer:

a. an unfavorable raw materials usage variance.

Explanation:

The letter a is the most appropriate alternative to the above question, since the fact that a purchasing agent managed to acquire raw materials at a bargain price and this action resulted in a favorable variation in the purchase price of raw materials, this same action could be compensated for by an unfavorable variation in the use of raw materials, since the raw materials purchased at a cheaper price, their quality was lower than that of the raw materials commonly used, which could generate quality losses , production and sales.

Answer 2

Answer:

a) an unfavorable raw materials usage variance

Explanation:

Material price variance

A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite

Material usage variance

A material usage variance occurs when the standard quantity required to active a particular level of production is higher or lower than than the actual actual quantity used. A favorable variance would mean than less quantity of materials were used than the standard to achieve a given output level. And an adverse variance would mean the opposite

Relationship between Usage variance and Price variance

Where savings are made from purchase of cheap and inferior quality materials these might lead to an unfavorable (adverse) usage variance by a greater value .This is so because workers might need to use a larger quantity ( more than the standard required) of a low-quality materials to achieve production.