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An adverse material usage variance together with a favourable materials price variance could suggest that:
a. We are using less materials than expected but in total we are paying more than we should
b. We are paying higher prices for our materials than expected
c. We are paying less for our materials than expected but we are using more materials
d. We are paying the same for our materials but we are using more than expectedthe answer should be C but my notes says its D. pls help
D is not worded very well, but it is meaning that they are paying the same in total for the materials but using more than expected (not that they are paying the same amount per unit).
If they are paying the same in total but are using more, then it must mean that the cost per unit is lower and hence a favourable price variance.
Are you sure that you copied the question word for word? If you have, then again it is badly worded. If there is a favourable price variance then they are paying less per unit for materials (which would give C as the answer), however they could still be paying the same in total for materials because they are using more.
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