If the Total Materials Variance for a Given Operation Is

question 13

Multiple Choice

If the total materials variance for a given operation is favorable, why must this variance be further evaluated as to price and usage?

• A) There is no need to further evaluate the total materials variance if it is favorable.
• B) Generally accepted accounting principles require that all variances be analyzed in three stages.
• C) All variances must appear in the annual report to equity owners for proper disclosure.
• D) A further evaluation lets management evaluate the activities of the purchasing and production functions.

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Definitions:

Cost of Equity

The cost of equity is the return that a company is expected to pay to its shareholders for their investment in the company's equity.

Flotation Costs

Expenses incurred by a company when it issues new securities, including fees to underwriters, legal fees, and registration fees.

WACC

The Weighted Average Cost of Capital (WACC) is a calculation of a firm's cost of capital, where each category of capital is proportionately weighted.

Tax Rates

The percentage at which an individual or corporation is taxed, which can vary based on the taxable amount or income.