COST ACCOUNTING
STANDARD COSTING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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actual rate of direct materials is equal to standard rate of direct materials
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actual rate of direct materials is less than standard rate of direct materials
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actual rate of direct materials is higher than standard rate of direct materials
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actual rate of direct materials is less than previous year’s rate of direct materials
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Detailed explanation-1: -Answer and Explanation: The correct answer is B) The actual cost of direct materials purchased was less than the standard cost of direct materials purchased. Favorable direct materials cost variance occurs when the company had savings or incur costs that is less than what is budgeted.
Detailed explanation-2: -If the actual price paid per unit of material is lower than the standard price per unit, the variance will be a favorable variance. A favorable outcome means you spent less on the purchase of materials than you anticipated.
Detailed explanation-3: -If the actual price paid for materials is more than the standard price, an unfavorable materials price variance occurs. On the other hand, if the actual price paid for the materials is less than the standard price, a favorable materials price variance occurs.
Detailed explanation-4: -The purchase price variance is the difference between the standard and actual cost per unit of the direct materials purchased, multiplied by the standard number of units expected to be used in the production process. This variance is the responsibility of the purchasing department.
Detailed explanation-5: -A favorable direct materials price variance and an unfavorable direct materials quantity variance might indicate which of the following? Less expensive, inferior materials requiring more than the standard amount were used in production.