COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Actual expenditure on fuel lower than in the budget
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Actual raw material costs higher than the budgeted figure
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Sales revenue actually received greater than in the budget
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Budgeted wages less than actual wages
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Detailed explanation-1: -Adverse and Favourable Variances An adverse variance is where actual income is less than budget, or actual expenditure is more than budget. This is the same as a deficit where expenditure exceeds the available income.
Detailed explanation-2: -When revenue is higher than the budget or the actual expenses are less than the budget, this is considered a favorable variance. Unfavorable variances refer to instances when costs are higher than your budget estimated they would be.
Detailed explanation-3: -Reasons for adverse material usage variance include: Purchase of materials of lower quality than the standard (this will be reflected in a favorable material price variance). Use of unskilled labor. Increase in material wastage due to depreciation of plant and equipment.