Cost Variance Analysis nah State Learn Progress You are on question 3 of 13 innovative and shop As a business consultant, you have been called in to examine some large variances in direct materials and labor for a local business. When looking at their numbers, you notice that both show a 20% variance over budget. What might the reason be? A budgeting error would be the most likely cause. Mismanagement is the most likely cause of that type of a variance. Increased sales, increased raw materials pricing, machinery breakdowns or wage spikes due to labor negotiations or a labor shortage. Previous Next