Page 229 - Microsoft Word - 00 Prelims.docx

Advanced variances

Variance Favourable Adverse

Materials price  Poorer quality materials  Higher quality materials

 Discounts given for buying  Change to a more
in bulk expensive supplier
 Change to a cheaper  Unexpected price
supplier increase encountered

 Incorrect budgeting  Incorrect budgeting

Materials  Higher quality materials  Poorer quality materials
usage
 More efficient use of  Less experienced staff
material using more materials

 Change is product  Change in product
specification specification

 Incorrect budgeting  Incorrect budgeting

The materials price and usage variances may be linked. For example,
the purchase of poorer quality materials may result in a favourable price
variance but an adverse usage variance.

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