Reasons of Material related variances

The possible reasons for each type of variances and the suggested course of action are given below. This is only illustrative and not exhaustive.

Reasons of Material price variance:

• Change in Basic Price
• Fail to purchase the anticipated standard quantities at appropriate price

 Suggested course of solutions :

• Departmental head should take necessary action to purchase at right point of time
• Cash discount or interest rate for payment of purchase should be consider at the time of such payment
• Price check on the purchase of standard quality materials

Reasons of Material usage variance:

• Use of sub-standard material
• Ineffective use of materials
• Pilferage
• Non standardized mix

Suggested course of solutions :

• Regular Inspection of quality of materials
• Proper training of operators
• Ensure best utilization of resources
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