Lotus corporation is manufacturing one product and uses standard cost system to evaluate performance. The manager who is responsible of buying the needed quantity of raw materials was able to buy a cheaper grade of materials (lower quality also) to use production. Which group of variances may result from the action of purchasing department? Select one: a. Unfavorable price variance and unfavorable quantity variance b. Favorable price variance and favorable quantity variance c. Favorable price variance and zero quantity variance d. Unfavorable quantity variance and favorable price variance
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This would result in a favorable price variance because the actual cost is lower than the standard cost. However, the lower quality of materials may lead to a higher quantity of materials needed to produce the same amount of product. This would result in an Show more…
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