Question: ABC Limited suffered a poor operating result this year due to an industry downturn. Both production and sales were 10% lower than budget. Raw materials

ABC Limited suffered a poor operating result this year due to an industry downturn. Both production and sales were 10% lower than budget. Raw materials (kg) used were 15% below budget, and the cost of raw materials was 12% below budget.

Is the direct materials price variance favourable or adverse? What factors could the variance be attributable to?

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