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Why a favorable direct materials price variance might be of concern?
A favorable direct materials price variance may be the result of the purchase of cheaper materials that may be of inferior quality, thereby causing an inferior product. An inferior quality can also cause more spoilage and waste.
Why would a favorable price variance for material might be the cause of unfavorable quantity variance?
A favorable/unfavorable price variance does not effect your quantity variance. The reason you would see a favorable price variance and an unfavorable quantity variance is because you consumed more materials than your standard allows AND the price you paid for those material was less than your standard price. If you paid more than your standard price, you would have experienced an unfavorable variance in both quantity and price.
What does a debit balance in the labor efficiency variance account indicate?
a debit balance in the labor efficiency variance account indicates that actual rate and actual hours exceed standard rates and standard hours
Favorable materials quanity variance?
In cost accounting, a variance is the difference between what we expected to happen (what we planned for when we created the budget) and what actually happened. If we produce more units from a given quantity of raw material than we expected to produce when we set up the budget, we have a favorable materials quantity variance, because we produced the goods more efficiently than we had planned for. We have used the raw materials with less waste than expected.
Labor Efficiency Variance resulting from the use of poor quality materials should be charged to?
the production manager
Why a favorable direct materials price variance might be of concern?
A favorable direct materials price variance may be the result of the purchase of cheaper materials that may be of inferior quality, thereby causing an inferior product. An inferior quality can also cause more spoilage and waste.
Why would a favorable price variance for material might be the cause of unfavorable quantity variance?
A favorable/unfavorable price variance does not effect your quantity variance. The reason you would see a favorable price variance and an unfavorable quantity variance is because you consumed more materials than your standard allows AND the price you paid for those material was less than your standard price. If you paid more than your standard price, you would have experienced an unfavorable variance in both quantity and price.
Why are variances generally segregated in terms of a price variance and an efficiency variance?
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
What does a debit balance in the labor efficiency variance account indicate?
a debit balance in the labor efficiency variance account indicates that actual rate and actual hours exceed standard rates and standard hours
Favorable materials quanity variance?
In cost accounting, a variance is the difference between what we expected to happen (what we planned for when we created the budget) and what actually happened. If we produce more units from a given quantity of raw material than we expected to produce when we set up the budget, we have a favorable materials quantity variance, because we produced the goods more efficiently than we had planned for. We have used the raw materials with less waste than expected.
What difference between a favorable variance and an unfavorable variance?
Favourable variance is that variance which is good for business while unfavourable variance is bad for business
Is a positive variance always favorable?
A positive variance is not always favorable; it depends on the context. In financial terms, a positive variance in revenue indicates better-than-expected performance, which is favorable. However, a positive variance in expenses could mean costs are higher than budgeted, which is unfavorable. Thus, assessing whether a positive variance is favorable requires understanding the specific metrics and their implications.
When would a variance be labeled as favorable?
a
What is favourable variance?
A favorable variance is the difference between the budgeted or standard cost and the actual cost. If the actual cost is less than budgeted or standard cost, it is a favorable variance.
Why a favorable fixed overhead expenditure variance might be reported?
The price variance might result from use of cheaper but inferior quality materials hence though it will be cheaper , the final product will be compromised .
Labor Efficiency Variance resulting from the use of poor quality materials should be charged to?
the production manager
It is best to isolate the material quantity variance when the materials are purchased?
false- it is best to isolate them once you know how much of the material has been used. If you don't know how much is used, you can't get a variance to evaluate efficiency of how materials were used.
