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The following variances are extracted from the monthly management accounts of SG Co.
Direct material total variance $800 (Adverse)
Direct material usage variance $1,200 (Favorable)
Which of the following statements are consistent with these variances?
(i) High-quality material was purchased, which led to a lower level of quality control rejects of completed output
(ii) Rapid inflation affected the price of the company’s raw material so efforts were made to reduce the quantity of material used per unit of output
A (i) only
B (ii) only
C (i) and (ii)
D Neither of the statements is consistent with the variances
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The answer is A