All of these are possible reasons for a favourable materials cost variance, except:Group of answer choicescost savings on the purchase of materials.an overestimation of materials usage in the original budget.the more efficient use of materials.an increase in production above budget.
Question
All of these are possible reasons for a favourable materials cost variance, except:Group of answer choicescost savings on the purchase of materials.an overestimation of materials usage in the original budget.the more efficient use of materials.an increase in production above budget.
Solution
The correct answer is "an increase in production above budget." This is not a possible reason for a favorable materials cost variance. A favorable materials cost variance occurs when the actual cost of materials is less than the budgeted or standard cost. This could be due to cost savings on the purchase of materials, an overestimation of materials usage in the original budget, or the more efficient use of materials. However, an increase in production above budget would likely lead to a higher actual cost of materials, not a lower one, and therefore would not result in a favorable variance.
Similar Questions
Which of the following are possible causes of a favourable direct materials price variance?Group of answer choicesAll of the above are causes of a favourable direct materials price variance.Materials prices increased unexpectedly due to industry shortage.The purchasing manager bought in smaller lot sizes than budgeted, thus not obtaining the purchase discounts that were factored in the budget.None of the given choices are correctMaterials prices decreased unexpectedly due to industry oversupply.
If actual raw materials cost exceeds the budgeted raw materials cost, then the variance is a(n) (favorable/unfavorable) variance.
A raw materials budget variance is further analyzed into a raw materials (price/rate/spending) variance and a raw materials (usage/efficiency) variance.
When the actual amount spent exceeds the standard amount that should have been spent, the material spending variance is .
The difference between the actual amount of materials used in production and the standard amount of materials allowed for the actual output, multiplied by the standard price per unit of materials is the materials variance.
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