The sum of the price and usage variances will add up to the total materials variance only if the materials purchased is equal to the materials used.

Question

Quizplus · Accepted Answer

The price variance measures the difference between the actual price paid for materials and the standard price, while the usage variance measures the difference between the actual quantity of materials used and the standard quantity. The total materials variance is the sum of both these variances. If the materials purchased is not equal to the materials used, there could be additional variances such as mix variance or yield variance that would affect the total materials variance. Therefore, the statement is true only when the materials purchased is equal to the materials used.

The Sum of the Price and Usage Variances Will Add