Port Harcourt Refineries Plc uses a standard costing system. A favourable Material Price Variance combined with an adverse Material Usage Variance MOST LIKELY indicates which of the following situations?

Question

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The purchasing department bought inferior quality materials at a lower price, leading to greater wastage and inefficiency in production. A favourable Material Price Variance indicates materials were purchased below standard price, often suggesting lower-grade or inferior materials were procured. An adverse Material Usage Variance indicates more material was consumed than the standard allows, which is a common consequence of using inf

Answer

A) The purchasing department bought superior quality materials at a higher price, leading to less wastage in production

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B) The purchasing department bought inferior quality materials at a lower price, leading to greater wastage and inefficiency in production

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C) The production department was more efficient than standard, consuming fewer materials than budgeted

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D) Both variances arose from the same cause: an unexpected reduction in market prices for raw materials

Port Harcourt Refineries Plc uses a standard costing system. A favourable Material Price Variance combined with an adverse Material Usage Variance MOST LIKELY indicates which of the following situations?

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