What do cost variances measure?
A) the difference between the cost the company pays and the cost its competitors pay
B) the change in costs over time
C) how well the business keeps unit costs of material and labor inputs within standards
D) the volume discounts companies receive when ordering direct materials in large quantities

Question

Quizplus · Accepted Answer

Cost variances measure how well the business keeps unit costs of material and labor inputs within standards. Cost variances compare actual costs to expected or standard costs, and indicate areas where costs may need to be controlled or improvements made. Option A is incorrect as cost variances do not typically compare a company's costs to those of its competitors. Option B is incorrect as cost variances compare costs at a specific point in time, rather than over time. Option D is incorrect as volume discounts do not relate specifically to cost variances.

What Do Cost Variances Measure