Indicate if the following item will affect one or more of the material or labor
ID: 2597984 • Letter: I
Question
Indicate if the following item will affect one or more of the material or labor cost variances. Further, indicate if each such cost variance will be favorable or unfavorable. Your company has recently switched to a new supplier makes delivery at a higher freight rate; however, the parts are significantly better in quality than before, resulting in less breakage of material. Select one or more: a. Farovable material quantity variance b. Unfavorable material quantity variance c. Favorable labor efficiency variance d. Unfavorable labor rate variance e. Favorable labor rate variance f. Unfavorable labor efficiency variance g. unfavorable material price variance h. None of the other responses is applicableExplanation / Answer
a. Favourable material quantity variance : This will happen as the materials are good in quality and the breakage of material less , thus less number of materials will be actually used than budgeted for.
g. Unfavourable material price variance : This will happen as the material purchased will be costlier than budgeted for. The higher freight cost will increase the cost of materials from the new supplier.