Question

You get what you measure!” If so, what problem might be created by managers attempting to achieve favorable material price variances?

Answer 1

In order to achieve favourable material price variance the managers might purchase inferior quality of materials at lower price than standard which would result in favourable material price variance as actual price will be lower than standard price. Because of this material quantity variance will become unfavorable. A material quantity variance is difference between actual amount of materials used and the amount that was expected to be used. Due to inferior quality of materials to improve material price variance, material quantity variance will become unfavorable because lot of material would be required for production. It might also lead to huge wastage of materials. It might also lead to production of defective final product.