ECONOMICS

Detailed explanation-1: -Ideal standards will generally result in favorable variances for the company. A standard is a unit amount, whereas a budget is a total amount. There could be instances where the production department is responsible for a direct materials price variance.

Detailed explanation-2: -Obtaining a favorable variance (or, for that matter, an unfavorable variance) does not necessarily mean much, since it is based upon a budgeted or standard amount that may not be an indicator of good performance.

Detailed explanation-3: -A favorable variance occurs when the cost to produce something is less than the budgeted cost. It means a business is making more profit than originally anticipated. Favorable variances could be the result of increased efficiencies in manufacturing, cheaper material costs, or increased sales.

Detailed explanation-4: -A favourable variance is where actual income is more than budget, or actual expenditure is less than budget. This is the same as a surplus where expenditure is less than the available income.

Detailed explanation-5: -Answer and Explanation: Option (D) is the correct answer. Standard cost is used as the tool for measuring efficiency for controlling the cost of production.