Which of the following does not result in a favorable direct materials price var

ID: 2585231 • Letter: W

Question

Which of the following does not result in a favorable direct materials price variance?

A. Budgeted purchase prices of direct materials were set too low without careful analysis of market conditions.

B. The purchasing manager changed to a lower minus price supplier.

C. The purchasing manager negotiated the direct materials prices more skillfully than was planned for the budget.

D. The price of direct materials decreased as a result of industry oversupply.

E. The purchasing manager ordered larger quantities than the quantities budgeted, and therefore obtained quantity discounts.

option B) the purchasing manager changed to a lower minus price supplies

Possible causes of a favorable direct materials price variance are:

· purchasing officer skillful negotiaion than was planned in the budget,

· purchasing manager larger lot sizes bought than budgeted, thus resulting in quantity discounts,

· materials prices decreased unexpectedly due to, say, industry oversupply,

· budgeted purchase prices were set without careful analysis of the market, and

· purchasing manager received unfavorable terms on nonpurchase price factors (such as lower quality materials).