If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed a:
A) variable variance
B) controllable variance
C) price variance
D) volume variance

Question

Quizplus · Accepted Answer

The variance described in the question, where the price paid per unit differs from the standard price per unit for direct materials, is known as a price variance. A price variance measures the difference between the actual price paid for the materials and the standard price that was expected, and is used to analyze whether or not a company is paying more or less than expected for its direct materials. A variable variance is a variance that changes in proportion to changes in the level of activity, a controllable variance is a variance that can be influenced by management, and a volume variance is a variance that measures the difference between actual production volume and the standard production volume. None of these options accurately describe the variance described in the question.

If the Price Paid Per Unit Differs from the Standard