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Causes of Materials Variances

Causes of Materials Variances - has no control such as the...

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Causes of Materials Variances What are the causes of a variance? The causes may relate to both internal and external factors. The  investigation of a  materials price variance usually begins in the purchasing department . Many  factors affect the price paid for raw materials. These include availability of quantity and cash  discounts, the quality of the materials requested, and the delivery method used. To the extent that  these factors are considered in setting the price standard, the purchasing department is responsible for  any variances.  However, a variance may be beyond the control of the purchasing department. Sometimes, for  example, prices may rise faster than expected. Moreover, actions by groups over which the company 
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Unformatted text preview: has no control, such as the OPEC nations' oil price increases, may cause an unfavorable variance. There are also times when a production department may be responsible for the price variance. This may occur when a rush order forces the company to pay a higher price for the materials. The starting point for determining the cause(s) of an unfavorable materials quantity variance is in the production department . If the variances are due to inexperienced workers, faulty machinery, or carelessness, the production department is responsible. However, if the materials obtained by the purchasing department were of inferior quality, then the purchasing department is responsible....
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Causes of Materials Variances - has no control such as the...

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