A favorable cost variance of significant magnitude:
A)is the result of good planning.
B)may lead to improved production methods if it is investigated.
C)indicates that management does not need to be concerned about lax standards.
D)does not need to be investigated.

Question

Quizplus · Accepted Answer

A favorable cost variance of significant magnitude may indicate that there are potential efficiency gains or improvements to production methods that could be investigated to yield even greater cost savings in the future. Therefore, it should be investigated. Option A is true, but does not fully answer the question. Option C is incorrect, as management should still monitor and ensure that standards are being met. Option D is incorrect as any significant cost variance should be investigated, even if it is favorable.

A Favorable Cost Variance of Significant Magnitude