Efficient Corporation uses a standard cost system.The following information was provided for the period that just ended:
A) $216,000 favorable.
B) $32,400 favorable.
C) $89,100 unfavorable.
D) $121,500 unfavorable.

Question

Quizplus · Accepted Answer

The variance for A is favorable, meaning the actual cost was lower than the standard cost. This is good news, but it alone doesn't tell us whether the company as a whole did well or not. Similarly, B is favorable and also good news, but it still doesn't give us a sense of whether the company as a whole did well or not. D is unfavorable, which is definitely bad news, but again, it doesn't give us the big picture. 
C is the only option that tells us the company as a whole did not do well because it is the only unfavorable variance. It means the actual cost exceeded the standard cost by $89,100, which is a significant amount. The company needs to investigate this variance to understand where the actual cost is higher and take corrective actions to improve efficiency and reduce costs.

Efficient Corporation Uses a Standard Cost System