19. An adverse material usage variance together with a favourable materials price variance could suggest that: a) We are paying less for our materials than expected but we are using more materials b) We are paying higher prices for our materials than expected c) We are paying less for our materials and we are using less than expected d) We are using less material than expected but we are paying more than we should
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
19. An adverse material usage variance together with a favourable materials price
variance could suggest that:
a) We are paying less for our materials than expected but we are using more
materials
b) We are paying higher prices for our materials than expected
c) We are paying less for our materials and we are using less than expected
d) We are using less material than expected but we are paying more than we
should
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