Asked by Artem Balatskiy on Jul 29, 2024

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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.
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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.