Which of the following is the most likely explanation for an unfavorable materials usage variance and a favorable labor wage variance quizlet?
9- Which of the following is the most likely explanation for an unfavorable materials usage variance and a favorable labor wage variance? The company experience labor turnover and newer, less experienced employees were hired.
What are some common causes of unfavorable quantity variances?
You're most likely to run into an unfavorable materials quantity variance because of one of the following issues.
- Abnormal spoilage. …
- Inadequately trained workers. …
- Inaccurate standard material quantity. …
- Estimate the standard material quantity. …
- Determine the actual material quantity.
How do you know if a materials quantity variance is favorable?
If there is no difference between the actual quantity used and the standard quantity, the outcome will be zero, and no variance exists. If the actual quantity of materials used is less than the standard quantity used at the actual production output level, the variance will be a favorable variance.
What is a favorable quantity variance?
Quantity variance is used for planning and budgeting as a quality assurance metric to ensure ordering and production remain efficient. If the actual units are less than the standard units, the variance is favorable and generally results in savings.
What does an unfavorable Labour efficiency variance indicate?
An unfavorable variance means that labor efficiency has worsened, and a favorable variance means that labor efficiency has increased.
What does an unfavorable direct labor rate variance indicate?
An unfavorable variance means that the cost of labor was more expensive than anticipated, while a favorable variance indicates that the cost of labor was less expensive than planned.
What does unfavorable variance mean?
An unfavorable variance is when costs are greater than what has been budgeted. The sooner these variances can be detected, the sooner management can address the problem and avoid a loss of profit. Unfavorable variances often indicate that something did not go according to plan, financially.
What is an unfavorable variance quizlet?
unfavorable variance. variance that has the effect of decreasing operating income relative to the budgeted amount.
What is the materials quantity variance?
A material quantity variance is the difference between the actual amount of materials used in the production process and the amount that was expected to be used. The measurement is employed to determine the efficiency of a production process in converting raw materials into finished goods.
What causes material variances?
Reason for Material Usage Variance Careless handling of materials by employees. Use of poor quality material. Poor maintenance and defects in machinery. Change in production design and production methods.
What is favorable and unfavorable variance?
A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, indicating losses or shortfalls. Budget variances occur because forecasters are unable to predict future costs and revenue with complete accuracy.
How do you tell if a variance is favorable or unfavorable?
If revenues were higher than expected, or expenses were lower, the variance is favorable. If revenues were lower than budgeted or expenses were higher, the variance is unfavorable.
What is material quantity variance?
A material quantity variance is the difference between the actual amount of materials used in the production process and the amount that was expected to be used. The measurement is employed to determine the efficiency of a production process in converting raw materials into finished goods.
Are unfavorable variances always bad?
Favorable variances are positive (although may indicate that you've been too cautious when drawing up your budget) and unfavorable variances are negative (although, again, it may simply be an indication that you haven't been cautious enough with regard to your financial planning).
What causes unfavorable labor variance?
Unfavorable labor variances occur when the wages and costs associated with labor are higher than expected.
What is Favourable and Unfavourable variance?
A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, indicating losses or shortfalls. Budget variances occur because forecasters are unable to predict future costs and revenue with complete accuracy.
What does a favorable direct materials price variance indicate?
A favorable DM price variance occurs when the actual price paid for raw materials is less than the estimated standard price. It could mean that the firm's purchasing department was able to negotiate or find materials with lower cost.
What is the difference between a favorable cost variance and an unfavorable cost variance quizlet?
A favorable variance has a result of increasing operating income relative to the budgeted amount. An unfavorable variance has a result of decreasing operating income relative to the budgeted amount.
What does a favorable direct materials cost variance indicate?
The correct option is (b) the actual cost of direct materials purchased was less than the standard cost of direct materials purchased. If the actual materials cost is less than the standard materials cost, it will result in a positive direct materials cost variance which indicates a favorable variance.
What is the correct interpretation of an unfavorable materials mix variance?
If the actual price paid for materials is more than the standard price, an unfavorable materials price variance occurs. On the other hand, if the actual price paid for the materials is less than the standard price, a favorable materials price variance occurs.
How do you know if something is favorable or unfavorable?
If revenues were higher than expected, or expenses were lower, the variance is favorable. If revenues were lower than budgeted or expenses were higher, the variance is unfavorable.
What is a quantity variance?
A quantity variance is the difference between the actual usage of something and its expected usage. For example, if a standard quantity of 10 pounds of iron is needed to construct a widget, but 11 pounds are actually used, then there is a quantity variance of one pound of iron.
What does an unfavorable volume variance mean?
An unfavorable volume variance indicates that the amount of fixed manufacturing overhead costs applied (or assigned) to the manufacturer's output was less than the budgeted or planned amount of fixed manufacturing overhead costs for the same time period.
What does direct material variance indicate?
The direct material variance is the difference between the standard cost of materials resulting from production activities and the actual costs incurred.
Why Favourable material price variance does not indicate good performance?
The Basis for a Favorable Variance Obtaining a favorable variance (or, for that matter, an unfavorable variance) does not necessarily mean much, since it is based upon a budgeted or standard amount that may not be an indicator of good performance.
What is the difference between a favorable variance and an unfavorable variance?
When revenue is higher than the budget or the actual expenses are less than the budget, this is considered a favorable variance. Unfavorable variances refer to instances when costs are higher than your budget estimated they would be.
What is the difference between a favorable cost variance and an unfavorable cost variance?
In the field of accounting, variance simply refers to the difference between budgeted and actual figures. Higher revenues and lower expenses are referred to as favorable variances. Lower revenues and higher expenses are referred to as unfavorable variances.
What does an unfavorable direct labor rate variance indicate quizlet?
An unfavorable direct labor rate variance indicates which of the following? The actual direct labor cost per hour exceeded the standard direct labor cost per hour for Actual Quantity (AQ) of direct labor hours.
Which of the following will result in an unfavorable direct labor cost variance?
Answer: c) when the actual direct labor cost per hour exceeds the standard direct labor cost per hour.
What is meant by favorable or unfavorable variance?
A favorable budget variance refers to positive variances or gains; an unfavorable budget variance describes negative variance, indicating losses or shortfalls. Budget variances occur because forecasters are unable to predict future costs and revenue with complete accuracy.