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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
• 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
• 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
• 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
• Proper training of operators
• Ensure best utilization of resources
