Page 111 - P1 Integrated Workbook STUDENT 2018

Variance analysis

3.2 Causes of materials variances

Materials price

 Using a different supplier.

 Changes to volume leading to achieving/losing bulk discounts.

 An unexpected increase in the prices charged by a supplier.

 Market shortages of materials.

 Unexpected buying costs, such as high delivery charges.

 Efficient or inefficient buying procedures.

 A change in material quality, resulting in either higher or lower purchase
prices.

Materials usage

 A change to the rate of scrap or wastage.

 Using a different quality of material (higher or lower quality) could affect the
wastage rate.

 Defective materials.

 Better/worse quality control.

 More/less efficient work procedures.

 Changes to production methods or product design.

 Changing the materials mix to obtain a more/less expensive mix than the
standard.

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