Causes of variances

Question 1

Favourable Material price variance

Answer 1

-Materials purchased from a cheaper supplier
-Larger Qty purchased so bulk discount received
-Over supply in market resulting in lower prices

Question 2

Adverse Material price variance

Answer 2

-Materials purchased from a more expensive supplier
-Smaller Qty purchased, didn’t qualify for bulk discount
-Reduction in supply in market resulting in lower prices

Question 3

Favourable Material Usage Variance

Answer 3

-Use of better quality material means less wastage
-Higher skilled staff resulted in less wastage
-Improved training of staff resulted in less wastage.

Question 4

Adverse Material Usage Variance

Answer 4

-Use of lower quality material means more wastage
-Less skilled staff resulted in more wastage
-Machine breakdown has resulted in more wastage