What does favorable direct materials price variance indicate?
If the actual price paid per unit of material is lower than the standard price per unit, the variance will be a favorable variance. A favorable outcome means you spent less on the purchase of materials than you anticipated.
What should be the response to a favorable DM price variance?
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 does the direct materials price variance measure?
Direct material price variance (also called direct material spending/rate variance) is the difference between the actual amount spent on direct material purchases during a given period, and the amount that would have been spent, had the material been acquired at the standard price.
What causes unfavorable direct materials price variance?
An unfavorable variance is the opposite of a favorable variance where actual costs are less than standard costs. Rising costs for direct materials or inefficient operations within the production facility could be the cause of an unfavorable variance in manufacturing.
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 does a favorable direct materials cost variance indicate quizlet?
A favorable direct materials price variance indicates which of the following? The standard cost of materials purchased was greater than the actual cost of materials purchased.
What does a favorable variance represent?
A favourable variance is where actual income is more than budget, or actual expenditure is less than budget. This is the same as a surplus where expenditure is less than the available income.
Why a Favourable material price variance does not necessarily 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.
Which of the following will result in unfavorable direct labor cost variance?
Answer: c) when the actual direct labor cost per hour exceeds the standard direct labor cost per hour.
What would be a possible reason why a direct labor efficiency variance would be a favorable variance for a period quizlet?
What would be a possible reason why a direct labor efficiency variance would be a favorable variance for a period? FMOH costs do not change per unit, but do chance in total. T/F? The fixed overhead volume variance explains why the fixed overhead is underallocated or overallocated.
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 know if direct labor rate variance is favorable or unfavorable?
If there is no difference between the standard rate and the actual rate, the outcome will be zero, and no variance exists. If the actual rate of pay per hour is less than the standard rate of pay per hour, the variance will be a favorable variance. A favorable outcome means you paid workers less than anticipated.
What would be a possible reason why a direct labor efficiency variance would be a favorable variance for a period?
What would be a possible reason why a direct labor efficiency variance would be a favorable variance for a period? FMOH costs do not change per unit, but do chance in total. T/F? The fixed overhead volume variance explains why the fixed overhead is underallocated or overallocated.
What might a favorable direct labor efficiency variance indicate?
A favorable labor efficiency variance indicates better productivity of direct labor during a period. Causes for favorable labor efficiency variance may include: Hiring of more higher skilled labor (this may adversely impact labor rate variance).
What is favorable variance?
A favourable variance is where actual income is more than budget, or actual expenditure is less than budget. This is the same as a surplus where expenditure is less than the available income.
What does Favourable rate variance mean?
A variance should be indicated appropriately as "favorable" or "unfavorable." A favorable variance is one where revenue comes in higher than budgeted, or when expenses are lower than predicted. The result could be greater income than originally forecast.
Is a favorable variance always an indicator of efficiency in operation?
In a standard costing system, some favorable variances are not indicators of efficiency in operations.
Is a Favourable variance always a good thing?
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 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.
What causes Favourable variance?
A favorable variance occurs when the cost to produce something is less than the budgeted cost. It means a business is making more profit than originally anticipated.