A purchasing manager buys a cheaper, lower-quality grade of material than standard. Which combination of variances is most likely to arise?

Correct answer: D) A favourable material price variance and an adverse material usage variance

Explanation

Paying less per kg gives a favourable price variance, but lower-quality material is likely to cause more wastage and rejects, giving an adverse usage variance. It may also slow production, causing an adverse labour efficiency variance. This illustrates the interdependence of variances.