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Which of the following statements is correct?
-an adverse direct material cost variance will always be a combination of an adverse material price variance and an adverse material usage variance
-an adverse direct material cost variance will always be a combination of an adverse material price variance and a favourable material usage variance
– an adverse direct material cost variance can be a combination of a favourable material price variance and a favourable material usage variance
– an adverse direct material cost variance can be a combination of a favourable material price variance and an adverse material usage variance
Sir i selected option 2 adverse material price variance and favourable usage, but that is incorrect option 3 is correct , the opposite, I didn’t get it why would usage be adverse, i mean either one of them could be adverse both should be correct? Or price variance would be adverse because it shows if our purchase cost exceeded the budgeted, could you explain me this sir please
The second statement states that it will always be a combination of an adverse price variance and a favourable usage variance.
It certainly could be that combination but it is not ALWAYS that combination.
They could both be adverse, or it could be an adverse usage and a favourable price.
I’m always hasty in reading questions which is why i make mistakes :’), i turned blind eye again to “always” obviously why would material price variance always be favourable vice versa for usage variance, i got it now sir thankyou so much! <3
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