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sir would you mind explaining with examples the following two lines, with regards to using cheaper materials and consequently obtaining a favourable material mix variance:
“using a greater proportion of a cheaper input material may lead to higher quality failure costs”. what are some examples of quality failure costs?
“increased rejects may lead to higher overhead costs”- did not understand this statement at all
Thank you sir!
It is always difficult for me to explain sentences without seeing them in context. If the statements are from an answer to a past exam question (or a question in the BPP Revision Kit) then please do tell me which question.
However, without seeing the context in which they were written, examples of quality failure costs are having to rework whatever is produced because it was poor quality, having to replace the goods if they had been delivered to a customer but were poor quality.
As far as the second statement is concerned, then if, for example, they have a department checking the quality of goods produced (the cost of the department is an overhead) then if there are more poor quality goods being produced (which therefore get rejected) then there will be more work for this department which might lead to greater costs (maybe the department will need more staff to cope with all the rejects).
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