A company reports a favourable material price variance and an adverse material usage variance in the same period. Which of the following is the most likely single explanation for both variances?

Correct answer: D) Cheaper, lower-quality material was bought, which led to more wastage in production

Explanation

Buying lower-grade material explains both results: the price paid was below standard (favourable price variance), but poorer quality caused more waste and rejects (adverse usage variance). A price rise or a low standard price would cause an adverse price variance, and careful skilled staff would cause a favourable usage variance.