Which of the following situation may lead to a favorable direct materials price variance?

Which of the following situations may lead to a favorable direct materials price variance? The purchasing manager was able to negotiate a lower purchase price for raw materials.

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 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 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 are some possible reasons for a material price variance?

Here are several possible causes of a direct material price variance:

Discount Application. A discount is to be retroactively applied to the base-level purchase price at the end of the year by the supplier, based on actual purchase volumes.
Materials Shortage. …
New Supplier. …
Rush Basis. …
Volume Assumption.

Feb 14, 2022

What are the causes of material variance?

If there is a material quantity variance, one or more of the following is usually the cause:

Low quality of raw materials.
Incorrect specification of materials.
Raw materials obsolescence.
Damage in transit to the company.
Damage while being moved or stored within the company.
Damage during the production process.

Which situation will result in a favorable 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. Favorable variances could be the result of increased efficiencies in manufacturing, cheaper material costs, or increased sales.

What causes unfavorable material price variance?

An unfavorable variance can occur due to changing economic conditions, such as lower economic growth, lower consumer spending, or a recession, which leads to higher unemployment. Market conditions can also change, such as new competitors entering the market with new products and services.

What are the causes of material price variance?

Causes of the Materials Price Variance

Rush deliveries.
Market-driven pricing changes, such as changes in the prices of commodities.
Bargaining power changes by suppliers, who may be able to impose higher prices than expected.

What are two possible causes of the direct materials quantity variance?

What Causes a Direct Material Usage Variance

An incorrect standard against which actual usage is measured.
Not changing the bill of materials after a production process or product design has been altered that should have resulted in a change in the amount of materials usage.

Which of the following could lead to an unfavorable direct materials efficiency variance?

If more materials are used than needed or budgeted for the job, an unfavorable efficiency variance results. Conversely, a favorable direct materials efficiency variance results when fewer materials are used than planned.

Which of the following is the reason of unfavorable direct materials quantity variance?

If the actual price paid for materials is more than the standard price, an unfavorable materials price variance occurs.

What can cause an unfavorable material price variance?

Which of the following is not a cause of a direct materials price variance?

The correct answer is d) increased material cost per unit.

What causes Favourable and adverse variance?

An adverse variance is where actual income is less than budget, or actual expenditure is more than budget. This is the same as a deficit where expenditure exceeds the available income. A favourable variance is where actual income is more than budget, or actual expenditure is less than budget.

What causes Favourable material usage variance?

Definition of Materials Usage Variance The materials usage variance is unfavorable when the actual quantity of materials used exceeded the standard quantity of materials. The materials usage variance is favorable when the actual quantity of materials used was less than the standard quantity.

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 …

How do you determine 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 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 causes an unfavorable material 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 are the possible causes of material price variance?

Causes of the Materials Price Variance

Rush deliveries.
Market-driven pricing changes, such as changes in the prices of commodities.
Bargaining power changes by suppliers, who may be able to impose higher prices than expected.

Which of the following will cause an unfavorable material price variance?

An unfavorable materials price variance occurred because the actual cost of materials was greater than the expected or standard cost. This could occur if a higher-quality material was purchased or the suppliers raised their prices.

What are favorable variances?

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 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 factors might determine whether the price variance is favorable or unfavorable?

Variances are either favorable or unfavorable. A favorable variance occurs when net income is higher than originally expected or budgeted. For example, when actual expenses are lower than projected expenses, the variance is favorable. Likewise, if actual revenues are higher than expected, the variance is favorable.

What would cause a favorable price variance quizlet?

A materials price variance is unfavorable if the actual price exceeds the standard price. A favorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

Which of the following would produce a favorable materials price variance?

A materials price variance is termed as favorable if prices are less than expected and unfavorable when they are greater than expected.

Which of the following would produce a materials price variance quizlet?

The standard price per unit for direct materials should not include the cost of delivering the materials. Which of the following would produce a materials price variance? the materials price variance. Use of persons with high hourly wage rates in tasks that call for low hourly wage rates.

What are some possible reasons for a Material Price Variance?

Here are several possible causes of a direct material price variance:

Discount Application. A discount is to be retroactively applied to the base-level purchase price at the end of the year by the supplier, based on actual purchase volumes.
Materials Shortage. …
New Supplier. …
Rush Basis. …
Volume Assumption.

Feb 14, 2022

What would produce a materials price variance?

Companies evaluate materials price variance to see if actual price negotiations and market trends are keeping prices where they expected them to be or if these or other forces are bringing about changes to the pricing.