Question

1. An adverse material usage variance could be caused by which of the following?
   1. The storeroom supplying less material than is required by production
   2. The purchase of cheap material
   3. Poorly maintained machinery
   4. A series of short deliveries

1. Items 1 and 2 only
2. Items 2 and 3 only
3. Items 3 and 4 only
4. Items 1 and 4 only.

2. Which of the following situations is likely to cause adverse material usage variance?
   1. A shortage of the material used
   2. Employing unskilled machine operators
   3. Machinery idle time
   4. Limited storage space

Answer 1

1) Option B is correct

An adverse material usage variance arises when the actual material consume is higher than the budgeted/standard or expected material consumption.

Reasons for adverse material usage:

1.Purchase of material of low quality: When material of cheap quality is purchased at low price it will affect the material price variance leading to more items being wasted(since they are of cheap quality)This leads to increase on materials consumed.

2.Poorly maintained machinery:  If the machine is poorly maintained, this results in production of low quality/defective items which further leads to rejection of items.

Since options B indicated these two above stated reasons, it is the right option

The Store room supplying less material than required for production is not an issue because budgeted material usage is computed for Number of units produced for and hence it won't lead to the adverse material usage.

2)B.Employing unskilled machine operators is correct

Employment of unskilled labour(I.e machine operators) leads to less units of materials being produced and this resulting in high material quantity variance which makes the adverse usage variance

The others are incorrect

Because the adverse material usage occurs to high consumption or usage of materials not due to shortage of material used

Machine idle time and limited storage space won't affect the materials used in any way.