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 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 is the direct materials quantity variance?
Direct material quantity variance (also called the direct material usage or efficiency variance) is the difference between the standard cost of standard material allowed for actual production, and the standard cost of material actually used in production.
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 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 direct materials price variance and an unfavorable direct materials quantity variance likely indicate?
A favorable materials quantity variance indicates savings in the use of direct materials. An unfavorable variance, on the other hand, indicates that the amount of materials used exceeds the standard requirement.
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.
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.
What is unfavorable quantity variance?
If the actual quantity used is greater than the standard quantity, the variance is unfavorable. This means that the company has used excessive materials in producing its output. The excessive use of materials may be due to several reasons.
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 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 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.
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 cause an unfavorable quantity variance?
An unfavorable materials quantity variance means excessive use of direct materials. The excessive use of direct materials may be the result of a number of reasons including: Inexperienced or untrained workers. Lack of motivation.
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.
What does an Unfavourable variance mean?
Unfavorable variance is an accounting term that describes instances where actual costs are higher than the standard or projected costs. An unfavorable variance can alert management that the company's profit will be less than expected.
Is Favourable variance always indicator of efficiency in operations?
In a standard costing system, some favorable variances are not indicators of efficiency in operations.
How do you know if 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 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 favorable and unfavorable variances?
Favorable and unfavorable variances can be caused by a wide range of factors, including errors in the original budget (i.e., faulty calculations, bad data, etc.), changes in business conditions (i.e., economic downturn, new competitor entering the market, etc.), or simply exceeding/underperforming with regard to …
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 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.
In which situation would a favorable variance be an indication of a problem?
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 Favourable 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 favorable variance always good?
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 favorable and unfavorable mean?
What does favorable and unfavorable mean in accounting? 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.
Why did you decide the variance is favorable or unfavorable?
Favorable variances are defined as either generating more revenue than expected or incurring fewer costs than expected. Unfavorable variances are the opposite. Less revenue is generated or more costs incurred. Either may be good or bad, as these variances are based on a budgeted amount.
What does an unfavorable variance indicate?
Unfavorable variance is an accounting term that describes instances where actual costs are higher than the standard or projected costs. An unfavorable variance can alert management that the company's profit will be less 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.
How do you know if variances are favorable or unfavorable?
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.