Answer:
There are 3 possible primary answers:
- a. The production department had to use more materials since the quality of the material was inferior.
- The expectation that each metal shelf uses 2 lbs of materials is rounded off figure whereas in actual each metal shelf uses 2.0769 lbs of material
- There is a process loss of 0.0769 of material per metal shelf's manufacturing(3.7% process loss)
Explanation:
Given:
Expected Material required per metal shelf = 2 lbs
Cost of raw material = 4 $/lb
Material purchased in Oct-year 2= 25,000 lbs
Cost of purchased material in Oct-year 2 = 97,000 $
Cost of material per lbs purchased in Oct-year 2 = 97000/25000 = 3.88 $/lb
Total shelves produced = 13,000 Nos
Total material used = 27,000 lbs
Actual material used per metal shelf = 27000/13000 = 2.0769 lbs/Nos
Thus it is concluded that either the expected materials' amount of 2 lbs was rounded off or there happened a process loss 0.0769 lbs per metal shelf.
Why not these?
Cost of material per lbs purchased in Oct-year 2 = 97000/25000 = 3.88 $/lb
b. The purchasing manager paid more than expected for materials
As the purchased lot was cheaper (@ 3.88 $/lb) than regular rate of 4$/lb therefore the purchase manager didn't pay more than expected.
c. Production workers were more efficient than anticipated
Actual material used per metal shelf = 27000/13000 = 2.0769 lbs/Nos
As the more material was used than expected thus this statement can't be true.
d. The overall materials variance is positive, no further analysis is necessary
Actual material used per metal shelf = 27000/13000 = 2.0769 lbs/Nos
Considering we are using more materials than expected so the overall material variance should not be positive and we should plan further analysis.
