If you are in any kind of manufacturing, you will be required to budget direct[or raw] materials. For example in a steel mill one of the primary raw materials is iron ore. Lets say your product consumes 1# of iron ore, for every pound of steel produced The price/# from the iron ore supplier on january 1 is $1.00 per pound In January you've budgeted for making 1000# of steel a. what SHOULD be the pounds and $ of iron ore you used and reported for January? b. if you actually report using $1100 of iron ore for January, identify AT LEAST 3 possible causes for this overspending on iron ore