Forrest Corp. uses a standard cost system and has calculated the following variances for May:

Direct Materials Price Variance $20,000 Unfavorable

Direct Materials Usage Variance $40,000 Favorable

Direct Labor Efficiency Variance $20,000 Favorable

Which of the statements below BEST explains the possible performance tradeoffs that could have occurred?

Multiple Choice

• Higher priced materials were more difficult to work with resulting in less efficient use of direct materials.

• Cheap direct materials resulted in more waste causing inefficient usage of direct materials.

• Higher priced materials were easier to work with resulting in more efficient use of direct materials.

• None of the above. Any argument that a variance was caused by performance tradeoffs is rationalization by the manager responsible for the variance.