Asked by Artem Balatskiy on Jul 29, 2024
Verified
Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance.
Materials Price Variance
The difference between the actual cost of direct materials and the expected (standard) cost multiplied by the actual quantity purchased or used.
Labour Rate Variance
The difference between the actual cost of labor and the expected (or standard) cost.
- Investigate the factors leading to and the effects of advantageous and disadvantageous variances.
Verified Answer
CA
Chinedu AjuruchiJul 31, 2024
Final Answer :
False
Explanation :
The purchase of poor quality materials will typically result in an unfavorable materials price variance, as the materials will likely cost less than what was budgeted for but may result in additional costs for rework or replacement. The impact on the labour rate variance would depend on how the poor materials affected the amount of direct labour hours required to produce the product.
Learning Objectives
- Investigate the factors leading to and the effects of advantageous and disadvantageous variances.
Related questions
Which of the Following Statements Is Not True About the ...
The Following Data for November Have Been Provided by Hunn ...
Highfill Corporation's Variable Overhead Is Applied on the Basis of ...
Motts Incorporated Has a Standard Cost System in Which the ...
The Following Standards Have Been Established for a Raw Material ...