Barberry Limited had the following variances for March:

Material price variance$2,000 U

Material quantity variance$9,000 F

The materials were purchased from a new supplier who is anxious to enter into a long-term contract.

Required:

Answer both of the following questions in the box provided.

a)Would you recommend that Barberry sign the contract? Why or why not?(3 marks)

 

b)What impact could the materials purchased from the new supplier have on Barberry's labour efficiency variance?