Question

A? company's production department was experiencing a high defect rate on the assembly? line, which was slowing down production and causing wastage of valuable direct materials. the production manager decided to recruit some highly skilled production workers from another company to bring down the defect rate but was worried that the higher wages of these workers might negatively affect operating income. this would produce? a(n) ______

Answer 1

The situation above would produce an unfavorable materials price variance. A material price variance is a measure of the difference between the standard costs and actual costs. This value is unfavorable when the actual price is greater than the standard price which would result to a negative value of the variance.