Under what condition(s) might a favorable variance be considered unfavorable?
I.When a manager overproduces to fully utilize labor in a non-bottleneck department
II.When a manager buys a better quality materials at a cheaper price
A)I only
B)II only
C)Both I and II
D)Neither I nor II

Question

Quizplus · Accepted Answer

A favorable variance is typically considered desirable because it means that actual performance exceeded expected performance. However, in the case of overproduction to fully utilize labor in a non-bottleneck department, the favorable variance may lead to an increase in inventory carrying costs and other related expenses. Therefore, even though the variance is favorable in terms of labor utilization, it may be considered unfavorable when looking at overall costs and efficiency. On the other hand, buying better quality materials at a cheaper price is generally favorable and would not be considered unfavorable.

Under What Condition(s) Might a Favorable Variance Be Considered Unfavorable