What might you assume if a company had a favourable material price variance and an unfavourable material usage variance?
A) Direct labour rate was higher than standard
B) The actual material cost per unit was less than the standard cost per unit
C) Less material per unit was used than the standard usage per unit
D) All of the above

Question

Quizplus · Accepted Answer

A favourable material price variance indicates that the actual cost of materials used was lower than the standard cost of materials. An unfavourable material usage variance indicates that more materials were used than the standard amount. Therefore, the most likely explanation for this scenario is that the company was able to purchase materials at a lower cost than expected, but used more materials than planned.

What Might You Assume If a Company Had a Favourable