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Following are the potential causes of material usage variance. State the one that could properly explain adverse usage variance and at the same time indicate poor performance of production manager. Business has separate managers for production, material purchase and machine maintenance
1) selection of.new supplier offering quality for lower prices
2) Inadequate training of new recruited staff in production dept
3) Reduced quality material bought
4) change in production process causing extra losses of material
5) movt in exchange rates causing more expensive material
6) machine breakdown due to delay in annual maintenance scheduleSir I have two questions here:
Firstly, are all of the above causes of material usage variance?
Secondly, why point num 3 is not the correct answer for adverse material usage variance?1, 2, 3 and 4 are possible causes of a usage variance.
5 is not – just because the material is more expensive does not mean they use more or less material.
6 is not – breakdowns mean they produce less but does not mean they use more or less material for what they do produce.3 may result in an adverse usage variance. However it does not at the same time indicate poor performance of the production manager. It is not the production managers fault that they bought reduced quality material, it is the fault of the material purchase manager.
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