Sherry North is the supply manager for West Industries, a manufacturer of garden furniture for a major department store in Australia. As part of her bonus plan, Sherry must meet the materials budget that was established at the beginning of the year. As West Industries manufactures three products in large volumes, standard costs are easily established for the factors of production. The reports for the first half of the year indicate that the materials variance is unfavourable. In an attempt to achieve her bonus target, Sherry has been purchasing lower-grade materials at reduced costs from a new supplier. Management have been very pleased with the turnaround in the variance.

Required

What implications do Sherry’s actions have for West Industries as a whole (especially in relation to other variances that may be reported in the production area)?