Answer
To understand the causes of a flexible-budget variance for direct materials, a manager can analyze the detailed budget, break down the variance into price and quantity components, review historical data, assess supplier relationships and market conditions, examine changes in the production process, and consider quality control and communication with relevant departments. Root cause analysis may be necessary, followed by corrective actions for continuous improvement.
Work Step by Step
To understand the causes of a flexible-budget variance for direct materials, a manager can analyze the detailed budget, break down the variance into price and quantity components, review historical data, assess supplier relationships and market conditions, examine changes in the production process, and consider quality control and communication with relevant departments. Root cause analysis may be necessary, followed by corrective actions for continuous improvement.
