Question

Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Flexible Variances Budget Price Efficiency Material A $ 50 comma 000 $ 1 comma 100F $ 3 comma 600U Material B 69 comma 000 400U 1 comma 100F Direct manufacturing labor 87 comma 000 500U 2 comma 900F The most likely explanation of the above variances for Material A is that​ ________.

Answer 1

The most likely explanation is that company purchase a lower quality materials. The cost per unit of materials was lower, but more materials were needed.

Step-by-step explanation:

Material A

favorable price variance

and unfavorable efficiency variance

The most likely explanation is that company purchase a lower quality materials. The cost per unit of materials was lower, but more materials were needed.