Tele Mfg. Ltd. has a raw material consumption of ₹50 Crore per annum. It maintains a store consumption record. During the course of audit, the following facts came to light. There has been an adverse material variance of

The draft internal audit report would be as follows: The Board of Directors Tele Manufacturing Ltd. (Place) (Date) Internal Audit Report on Material Consumption Period covered (Date --- to ---- Date) It was noted that the adverse material consumption variance of raw material was ₹3 Crores (Usage Variance ₹1 crore and Price Variance ₹2 crore) more than the budget. The reasons for the same were an increase in usage due to: Substandard material quality Machine breakdown Erratic power supply Worker's not being very properly trained Machines being old and absence of precision CNC equipment, added to the increased consumption. The price of raw material was impacted by the war in the Middle East as well as Ukraine. The government imposed a countervailing duty on the material. All these factors led to an increase in the cost of raw materials. Remedial Measures suggested; a. Proper procurement planning should be done so that material can be purchased at the best price in economic qualities. b. Workers should be properly trained. c. Effective power back-ups d. A machine maintenance schedule should be drawn. e. A phased program of purchase of new CNC machine may be drawn up. Sd/- XT Internal auditor