Question

Franklin Inc. reported the following variances:

• Direct materials price variance                $ 0 Favorable
• Direct materials quantity variance         $2,000 Unfavorable
• Direct labor rate variance                             $6,000 Favorable
• Direct labor efficiency variance                $7,000 Unfavorable

Which of the following explanations is the most likely cause?

Group of answer choices

The sales manager decreased the selling price of the product, causing an increase in demand, a need to purchase raw material from new vendors, and the need for workers to work overtime.

Human Resources hired lower quality labor at a cheaper price causing more defective products and slower production.

The purchasing manager did not order enough raw materials, causing labor to be idle for much of the work week.

The production manager inefficiently scheduled maintenance, causing laborers to sit idle and then need to work overtime in order to meet demand.

The economy slowed, causing a decrease in demand, lower sales, and an increase in inventory.

Answer 1

As Per Facts of Case, Probable Reason for Above Situation,

• Human Resources hired lower quality labor at a cheaper price causing more defective products and slower production. (HIGH CONSUMPTION of Material & Labour)
• The purchasing manager did not order enough raw materials, causing labor to be idle for much of the workweek.(HIGH CONSUMPTION of Material & Labour)

REASON FOR NOT SELECTING,

• The sales manager decreased the selling price of the product, causing an increase in demand, a need to purchase raw material from new vendors, and the need for workers to work overtime. (NO PREMIUM FOR MATERIAL RATE & WAGE RATE)
• The production manager inefficiently scheduled maintenance, causing laborers to sit idle and then need to work overtime in order to meet demand. (NO OVERTIME PREMIUM)
• The economy slowed, causing a decrease in demand, lower sales, and an increase in inventory